Finance Minister Yuval Steinitz met this morning with Governor of the Bank of Israel Stanley Fischer over breakfast to patch up their differences following the highly publicized conflict between the two over the Bank of Israel's foreign exchange and interest rate policy. Sources inform "Globes" that the finance minister expressed support for the sporadic interventions of the Bank of Israel in the foreign exchange market, as long as they are carried out "cleverly, and take the market by surprise," in the words of a senior Finance Ministry official.
Both the ministry and the Bank of Israel described the atmosphere at the meeting as "very positive", and agreed that they would continue to cooperate in the same spirit as they had done over the past year and a half.
Last Friday, the Bank of Israel intervened again in the foreign exchange market, buying tens of millions of dollars, in the face of the continued decline of the US currency, which reached a two-year low, crossing the threshold of 3.64 shekels to the dollar.
"We must continue to help exporters, because exports must not be hurt at this time," said a senior Finance Ministry official, expressing support for the Bank of Israel's action.
Despite the atmosphere of reconciliation, Steinitz repeated his criticism of the policy of raising interest rates. The Ministry of Finance believes that widening interest-rate differentials between Israel and the US over time "will be problematic and difficult to deal with."
However, Steinitz made it clear to Fischer that, contrary to some reports, his statements about interest rate hikes being problematic related to policy in general, and not to the specific decisions taken last week.
Steinitz also updated Fisher on the intention to formulate a package of measures to help cool down the overheated real estate market. It is believed that these measures will receive their final form after Steinitz's forthcoming visit to the US.
Published by Globes [online], Israel business news - www.globes-online.com - on October 3, 2010
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