Governor of the Bank of Israel Prof. Stanley Fischer has moved to reassure the markets. Speaking at a press conference this morning he said, "I have called this press conference in light of recent events. Although I don't have a dramatic announcement to make, my goal is to explain how events overseas will affect us.
"The volatility began, as everyone knows, with the sub-prime crisis," continued Fischer, who knows the American market well from his days as chairman of the IMF and as a senior economist in the US. "Once the problems started, it was predictable that there should be losses in the US.
"The mortgages should have had a small impact. The problem began because nobody knew who exactly was holding them."
Fischer commented on the development of the crisis and the action that central banks took to tackle it. "The European Central Bank was the first to take action, perhaps because of some banks," he said.
Fischer focused on the measures undertaken in international markets on Friday, especially the cut in the discount lending rate by the US Federal Reserve Board. “Friday’s events strongly influenced indices in the US, as well as here and in Asia this morning. The Fed’s intervention is a significant step, without question, but they have other options. The Fed wants to limit the damage,” he said.
Commenting on the crisis in the US housing market, which ignited the present market crisis, Fischer added, “The US real estate market will grow, which will affect the global market as well.”
Fischer continued, “There is no liquidity problem in Israel, the market is functioning well. The government has passed the budget, which is a positive factor. In addition, exports are rising, markets are performing well, and there are no problems. I don’t see anything bad in the offing and I see no need for a major intervention by us.
“Our investigation has found that Israeli banks are not exposed to the sub-prime market. We’ll continue to manage monetary policy mainly with regard to achieving the inflation target. As for my interest rate decisions, on the basis of information we had at the time, I don’t think we erred. The decisions were correct. We were looking at the inflation target.”
Fischer said, “I talk with the prime minister from time to time, irrespective of the current situation. I don’t intend to comment on our relations with Federal Reserve Board Chairman Ben S. Bernanke or with anyone else. All in all, the correct measures were taken in the US.”
As for the collapse of Heftsiba, Fischer said, “The Bank of Israel is open to complaints on this matter. We’ve received more than 100 queries to date.”
Regarding the Bank Leumi (TASE: LUMI) tender, Fischer said, “The Ministry of Finance is responsible for the tender, not us. An investigation is underway, and I will not comment on Accountant General Dr. Yaron Zelekha’s remarks yesterday.”
Published by Globes [online], Israel business news - www.globes.co.il - on August 20, 2007
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