Israel's Flug Urges Government to Fill Monetary Policy Panelby
Two members of public have left panel, haven't been replaced
Flug says outside members contribute to `richness' of debate
Bank of Israel Governor Karnit Flug wants the government to act faster to replace two people who left the committee that sets the central bank’s base rate, saying that would improve the policy debate.
By law, the monetary policy panel has to consist of three central bank employees and three outside members with years of academic and professional experience in economics or business. One outside member, Rafi Melnick, completed his term a year ago and hasn’t been replaced, and another, Alex Cukierman, recently completed his term. The head of the search committee that is supposed to recommend new external appointments has resigned and hasn’t been replaced.
“Having a committee that includes three members from the public contributes to the richness of the debate, and therefore it is important that the process speeds up,” Flug said in an Oct. 28 interview.
The attorney general is responsible for appointing the head of the search committee. The appointment process “is expected to be completed soon,” the Justice Ministry said in an e-mailed statement.
Federal Reserve Vice Chairman Stanley Fischer, Flug’s predecessor, pressed for the establishment of the monetary committee, saying decisions made by groups were generally better than those made by a single person, the central banker. Enacting the new Bank of Israel Law that set up the panel was a key factor in Fischer’s decision to agree to a second term. He left the bank in the middle of that term only after making sure that the committee framework was established and functioning well, he said at the time.
“The idea is that a committee makes better decisions because they bring more talent into the meeting, and usually the outcome is more balanced,” says Zvi Eckstein, dean of the Arison School of Business and Tiomkin School of Economics at the Interdisciplinary Center Herzliya.
Eckstein, who served as deputy governor under Fischer before the monetary committee was formed, suggested the law be amended to let the governor appoint temporary members from the central bank to the panel until the government appoints permanent replacements.
“They make important decisions,” Eckstein said. “There are a lot of decisions to make, and it’s not simple. It’s a lot of responsibility.”