Bank of Israel Governor Stanley Fischer, hinted that the central bank may stop intervening in the forex market. The central bank has been buying dollars for months now trying to send a signal to the market that the shekel should depreciate. While I don’t think it was the intervention that has weakened the shekel, the fact is that the shekel has weakened by almost 30% from the high.

According to Globes: “Fischer also implied that the Bank of Israel’s dollar purchase plan was drawing to a close. “We must weigh the future of the dollar purchase plan.” Fischer continued, “In January 2010, we’ll still be under the inflation target for the preceding 12 months. The 12-month inflation rate will plummet from 5% as of October 2008 to minus 0.4% in October 2009. Inflation this year will again undershoot the target, that is too low.”

Fischer continued to paint a fairly rosy picture of the Israeli economy. He has been doing this for months, even as economic data has proved otherwise. let’s hope he is finally right.

Share with others: