Israel makes a ‘politically correct’ choice

With the resignation of Stanley Fischer, Israel chose as replacement former central bank of Israel chief Jacob Frenkel:

Throughout his years in the international finance scene, however, he remained a frequent traveler to Israel, maintaining his close ties with the Israeli political elite and also with his successor, Fischer. This May he delivered a speech at the 13th Herzliya Economic Conference, in which he said that the economic crises plaguing the world were caused by structural problems that couldn’t be solved by merely printing money.

At the conference, Frenkel had an enlightening conversation with Axel Weber, today the chairman of the Swiss banking group UBS and formerly the leader of Deutsche Bundesbank, the German central bank.

“We were both formerly central bankers and I personally can say I wouldn’t want to be a central banker today, with interest rates at rock bottom, because there’s almost nothing that can be done,” Frenkel observed. Every central banker knows that keeping interest rates that low isn’t sustainable, he added: “That doesn’t mean it’s a bad policy, but that’s not a place anybody would want to be.” The Bank of Israel lending rate is now at 1.25%, not quite rock bottom but certainly very low.

One more for the “there´s almost nothing that can be done” bandwagon. The BIS will be pleased! His (almost) namesake Jeffrey Frankel doesn´t think so.

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