Bank of Israel Governor-Designate Says Growth Is Priority

Bank of Israel Governor nominee Leonardo Leiderman swiftly signaled that stimulating the economy was his top priority, suggesting he plans to chart a policy that will focus on growth and not just price stability.

In an interview published today in the Yediot Aharonot newspaper, Leiderman said he would quickly put his own stamp on the central bank, asking for “100 days of grace” to prove himself.

“We have to rev up the engines of growth much higher,” Leiderman was quoted as saying, without giving details. “We have to primarily work on expanding exports and increasing investments in the economy.”

Leiderman, chief economist at Israel’s largest lender, Bank Hapoalim Ltd., and a former research director at the central bank, was appointed yesterday to succeed Stanley Fischer, after former Governor Jacob Frenkel withdrew his candidacy on July 29. As governor, Leiderman would have to steer among shoals including slowing growth, a roaring shekel, sluggish global demand for the exports that drive Israel’s economy and climbing housing prices.

Markets responded positively to the appointment. The shekel was up 0.1 percent at 3.5606 per dollar at 10:04 a.m. in Tel Aviv, bringing its year-to-date gain to 4.9 percent, the largest advance among 31 major currencies Bloomberg tracks.

Following Fischer

Leiderman’s comments to Yediot indicated he would toe the line Fischer took when he expanded the bank’s traditional role of controlling inflation to include a focus on employment and growth, as does the Federal Reserve. During his eight years leading the bank, Fischer bought billions of dollars and calibrated interest rates to spur output.

Zvi Eckstein, a former deputy governor, said he expected Leiderman to follow Fischer’s lead.

“Professor Fischer left behind a very, very strong infrastructure for the bank’s operational direction,” Eckstein told Israel Radio today, referring to Fischer’s intervention policy. “I imagine Professor Leo Leiderman will continue this policy in the interest of price and financial stability.”

The Bank of Israel left the benchmark interest rate unchanged at 1.25 percent at the end of July, after lowering it gradually from 3.25 percent since 2011 in an effort to spur growth in the export-driven economy. The bank, under Fischer, also announced in May that it would buy more than $2 billion by the end of the year, citing the shekel’s appreciation and the downward revision in global growth forecasts.

‘Belonged to Consensus’

Yakir Plessner, who served as a deputy governor in the 1980s, described Leiderman as someone who “always belonged to the consensus.”

“The problem is, in senior positions of this type, it doesn’t hurt when important people think outside the box and go against the stream,” he told Israel Radio. “It means they have an open mind.”

Leiderman’s nomination must be approved by a panel that vets senior civil appointments and the cabinet. Frenkel’s nomination stumbled during the vetting process when the Haaretz newspaper dug up a 2006 incident where Frenkel had been briefly detained in Hong Kong for allegedly leaving an airport shop with an item that had not been paid for.

Frenkel said the incident was a misunderstanding that was fully clarified without further consequence. He said he no longer wanted the job after being subjected to an “avalanche of abuse.”

Lapid and Netanyahu said Frenkel would have been an excellent governor. They expressed regret over his withdrawal and concern that the incident could deter people from public service.