PARIS, May 25 (Reuters) - Bank of Israel Governor Stanley Fischer on Wednesday said exports were not being damaged by the strong shekel against the dollar.
'We have been pleasantly surprised by the behaviour of exports and we don't see any problem in the area of exports at current exchange rates,' Fischer told Reuters Insider TV on the sidelines of the OECD forum in Paris.
'If the exchange rate were to move dramatically, we would probably have to intervene again but of course, we would always prefer not to intervene if we can avoid it,' he added.
Fischer also said the rationale for Monday's quarter-point rate increase that surprised some players was mainly due to an inflation rate significantly above 3 percent, Israel's labour market being at full employment and a rapidly growing economy.
He projected that Israel's economy would grow between 4.5 and 5 percent in 2011 after a 4.7 percent rate in 2010.
Watch the Reuters Insider TV interview
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(Reporting by Axel Threlfall, Writing by Steven Scheer)
((steven.scheer@thomsonreuters.com; +972 2 632 2210; Reuters Messaging: steven.scheer.reuters.com@reuters.net))
Keywords: ISRAEL FISCHER/
* Israel cbank head sees 4.5-5 pct economic growth in 2011
* Fischer: Israel is essentially at full employment
* Fischer: Main priority on housing is halt price rises
* Fischer: IMF head should not have to be European
PARIS, May 25 (Reuters) - The Bank of Israel prefers not to intervene in the foreign exchange market but will do so if the shekel strengthens significantly, Governor Stanley Fischer said on Wednesday.
Israel's central bank chief also projected Israel's economy would grow by 4.5 to 5 percent this year as exports remain strong.
'We have been pleasantly surprised by the behaviour of exports and we don't see any problem in the area of exports at current exchange rates,' Fischer, a former first managing director of the International Monetary Fund (IMF), told Reuters Insider TV on the sidelines of the OECD forum in Paris.
'If the exchange rate were to move dramatically, we would probably have to intervene again but of course, we would always prefer not to intervene if we can avoid it,' he added.
The Bank of Israel has bought tens of billions of foreign currency the past three years in part to prevent damage to local exporters since exports account for more than 40 percent of Israel's economic activity.
It bought $1.495 billion of forex in April but purchases so far in May were small amid news that exports continue to grow despite the strong shekel, which is near a three-year peak versus the dollar. Exports grew 16 percent in the first quarter.
Fischer also said inflation, at an annual rate of 4 percent in April, was too high and required the central bank to raise its benchmark rate by a quarter-point to 3.25 percent on Monday.
The hike was the fourth in five months and 10th in the current cycle.
'Our inflation rate has eased but it is still significantly above the 3 percent upper limit of our target range and is expected to stay there,' Fischer said, adding inflation would fall back below a 3 percent rate within a year.
'We are essentially at full employment now,' he said, referring to a jobless rate of 6 percent. 'We are growing very fast and the major threats we would face are in the direction of inflation.'
HOUSING BUBBLE
One key concern for policymakers has been soaring housing prices and the central bank has acted to try and limit price gains. Fischer said the Bank of Israel does not want to burst the bubble.
'We want to reduce the pressure in the market gradually and we think we are doing that,' he said. 'Whether prices will go down is not entirely clear at this stage but the first priority is to stop them from going up.'
The central bank had previously indicated it would likely raise its 2011 estimate from a current forecast of 4.5 percent but Fischer declined to say to what level.
'I expect we will raise it but not by a huge amount,' Fischer said. He noted that while Israel has grown an average of 5 percent since 2003 except during the recession, 'I am not sure whether we can get there. We may be somewhere in the range of 4.5 to 5 percent, which would be very good in terms of increasing employment.'
Fischer has been mentioned as a possible replacement to head the IMF but he declined to say whether he has been approached about the job.
'It's one of the best jobs in the international system but I have a terrific job at the moment. It matters to me what happens in Israel,' Fischer said.
However, he said the convention of choosing an IMF chief must change.
'We have been told repeatedly it is about to change,' Fischer said. 'Saying it doesn't have to be a European doesn't mean it cannot be a European if they are the best candidate.
'I hope we will take away the geographical presumption,' he said. 'I thought we had already done that but apparently not.'
Watch the Reuters Insider TV interview
http://link.reuters.com/mev69r
(Reporting by Axel Threlfall, Writing by Steven Scheer) Keywords: ISRAEL FISCHER/ (steven.scheer@thomsonreuters.com; +972 2 632 2210; Reuters Messaging: steven.scheer.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
'We have been pleasantly surprised by the behaviour of exports and we don't see any problem in the area of exports at current exchange rates,' Fischer told Reuters Insider TV on the sidelines of the OECD forum in Paris.
'If the exchange rate were to move dramatically, we would probably have to intervene again but of course, we would always prefer not to intervene if we can avoid it,' he added.
Fischer also said the rationale for Monday's quarter-point rate increase that surprised some players was mainly due to an inflation rate significantly above 3 percent, Israel's labour market being at full employment and a rapidly growing economy.
He projected that Israel's economy would grow between 4.5 and 5 percent in 2011 after a 4.7 percent rate in 2010.
Watch the Reuters Insider TV interview
http://link.reuters.com/mev69r
(Reporting by Axel Threlfall, Writing by Steven Scheer)
((steven.scheer@thomsonreuters.com; +972 2 632 2210; Reuters Messaging: steven.scheer.reuters.com@reuters.net))
Keywords: ISRAEL FISCHER/
* Israel cbank head sees 4.5-5 pct economic growth in 2011
* Fischer: Israel is essentially at full employment
* Fischer: Main priority on housing is halt price rises
* Fischer: IMF head should not have to be European
PARIS, May 25 (Reuters) - The Bank of Israel prefers not to intervene in the foreign exchange market but will do so if the shekel strengthens significantly, Governor Stanley Fischer said on Wednesday.
Israel's central bank chief also projected Israel's economy would grow by 4.5 to 5 percent this year as exports remain strong.
'We have been pleasantly surprised by the behaviour of exports and we don't see any problem in the area of exports at current exchange rates,' Fischer, a former first managing director of the International Monetary Fund (IMF), told Reuters Insider TV on the sidelines of the OECD forum in Paris.
'If the exchange rate were to move dramatically, we would probably have to intervene again but of course, we would always prefer not to intervene if we can avoid it,' he added.
The Bank of Israel has bought tens of billions of foreign currency the past three years in part to prevent damage to local exporters since exports account for more than 40 percent of Israel's economic activity.
It bought $1.495 billion of forex in April but purchases so far in May were small amid news that exports continue to grow despite the strong shekel, which is near a three-year peak versus the dollar. Exports grew 16 percent in the first quarter.
Fischer also said inflation, at an annual rate of 4 percent in April, was too high and required the central bank to raise its benchmark rate by a quarter-point to 3.25 percent on Monday.
The hike was the fourth in five months and 10th in the current cycle.
'Our inflation rate has eased but it is still significantly above the 3 percent upper limit of our target range and is expected to stay there,' Fischer said, adding inflation would fall back below a 3 percent rate within a year.
'We are essentially at full employment now,' he said, referring to a jobless rate of 6 percent. 'We are growing very fast and the major threats we would face are in the direction of inflation.'
HOUSING BUBBLE
One key concern for policymakers has been soaring housing prices and the central bank has acted to try and limit price gains. Fischer said the Bank of Israel does not want to burst the bubble.
'We want to reduce the pressure in the market gradually and we think we are doing that,' he said. 'Whether prices will go down is not entirely clear at this stage but the first priority is to stop them from going up.'
The central bank had previously indicated it would likely raise its 2011 estimate from a current forecast of 4.5 percent but Fischer declined to say to what level.
'I expect we will raise it but not by a huge amount,' Fischer said. He noted that while Israel has grown an average of 5 percent since 2003 except during the recession, 'I am not sure whether we can get there. We may be somewhere in the range of 4.5 to 5 percent, which would be very good in terms of increasing employment.'
Fischer has been mentioned as a possible replacement to head the IMF but he declined to say whether he has been approached about the job.
'It's one of the best jobs in the international system but I have a terrific job at the moment. It matters to me what happens in Israel,' Fischer said.
However, he said the convention of choosing an IMF chief must change.
'We have been told repeatedly it is about to change,' Fischer said. 'Saying it doesn't have to be a European doesn't mean it cannot be a European if they are the best candidate.
'I hope we will take away the geographical presumption,' he said. 'I thought we had already done that but apparently not.'
Watch the Reuters Insider TV interview
http://link.reuters.com/mev69r
(Reporting by Axel Threlfall, Writing by Steven Scheer) Keywords: ISRAEL FISCHER/ (steven.scheer@thomsonreuters.com; +972 2 632 2210; Reuters Messaging: steven.scheer.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.