April 15, 2021

Bank of Israel Chief in ’90s Is Choice to Lead It Again

JERUSALEM — Jacob Frenkel, an inflation hawk who was Bank of Israel governor in the 1990s, will return to the helm of the central bank, Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid said on Sunday.

Mr. Frenkel will replace Stanley Fischer, who is stepping down at the end of June after eight years on the job, having guided Israel’s economy through the global financial crisis.

Mr. Frenkel, 70, beat out the deputy governor, Karnit Flug, who will most likely be acting governor until Mr. Frenkel starts. The date of his arrival was not announced.

“He is a world-renowned figure, which is what Netanyahu was looking for,” said Jonathan Katz, an economist at HSBC.

As governor from 1991 to 2000, Mr. Frenkel was credited with reducing inflation, liberalizing financial markets and removing foreign exchange controls.

He is chairman of JPMorgan Chase International, and he has also served as vice chairman of the American International Group and chairman of Merrill Lynch International. Mr. Frenkel also is the head of the Group of Thirty, a private consulting group on global and financial issues.

Joseph Fraiman, chief executive at Prico Risk Management and Investments, said Mr. Frenkel would “fill the position of Fischer with quality and authority.” He added, “No less important, Frenkel will benefit from the international credit that is greatly needed for the Israeli economy, especially in the current period.”

Mr. Frenkel, whose appointment requires cabinet approval, will face several challenges, including the upholding of Mr. Fischer’s policies toward Israel’s government and working to halt fast-rising home prices.

Israel’s economy grew 3.2 percent in 2012, a rate that is expected to slow to 2.8 percent this year, excluding the start of natural gas production.

Inflation, which ranged from 1.3 to 18 percent in the 1990s, was at an annual rate of 0.9 percent in May. At the same time, Israel’s currency remains strong.

To encourage economic growth and keep exports competitive, the Bank of Israel reduced its benchmark interest rate twice in May, to 1.25 percent. The central bank will review interest rates on Monday, and analysts largely believe the key rate will stay unchanged.

When Mr. Frenkel was last in the job, the governor alone made interest rate decisions. Now, there is a six-member monetary policy committee with the bank chief as chairman.

Mr. Frenkel “will need to work harmoniously with the monetary council he inherited from Fischer,” said Yaniv Pagot, chief strategist at the Ayalon Group. “This is not a simple challenge that could, in a certain situation, bring the first cracks.”

He said that, with Israel’s foreign exchange reserves nearing $80 billion, it would be interesting to see whether Mr. Frenkel would continue intervening in the currency market and buy dollars to defend Israel’s exports if the shekel continued to strengthen.

Article source: http://www.nytimes.com/2013/06/24/business/global/bank-of-israel-chief-in-90s-is-choice-to-lead-it-again.html?partner=rss&emc=rss