Amid increasing calls for the central bank to take action against the shekel, including demands to continue lowering the interest rate, Bank of Israel Governor Stanley Fischer said the shekel must not be viewed only in the context of the dollar and the central bank does not plan on dipping into the foreign exchange markets to curb the shekels sharp advances.
“It's not healthy,” Fischer said about intervention at a press conference marking the release of the central bank's annual report for 2006. “It would change the nature of the market completely. If we intervene, instead of the market focusing on fundamentals, it will be wondering how we were feeling that morning.”
Fischer's comments prompted another jump in the shekel, which climbed to a fixing of 4.1007 from 4.1264 late Tuesday.
Addressing the shekel's strength, Fischer repeated his often-stated belief that the shekel only showed strength against the dollar, but was remaining stable when compared to the Euro.
The governor of the Bank of Israel did state that it was difficult finding stability, but had his eye on the inflation rate, which stayed fixed between 1 and 3 percent.
“As every change in the interest rate also affects, to some extent, the rate of growth and the prices of financial assets, in making our interest rate decisions we have to take into consideration the trade-off between these three factors - inflation, growth and financial stability.”
“The continued success of Israel's economy depends this year on three main factors: developments in the global economy, over which we have no influence; the geopolitical situation, on which we have some effect; and continuation of the government's economic strategy as followed in the last few years, over which we in Israel do have control.”