Stanley Fischer (Photo)
A coalition of populist (or demagogic) forces is pressuring Bank of Israel Governor Stanley Fischer to lower interest rates (see Ha'aretz). Those pushing for the change are the Israeli Manufacturers' Association, which is suffering because of the high shekel, on the one hand, and parliamentarians ranging from Shelly Yachimovich (Labor) to Amnon Cohen (Shas). They want to see a reduction in interest rates to help workers in the export industry. If implemented, their agenda would set Israel back two decades. This kind of short-sighted intervention in fiscal policy by politicians, concerned about upcoming elections rather than the long-term economic growth of the country, will severely undermine investors' confidence in the Israeli market. The Central Bank's role is to check inflation by maintaining a strong currency; it should not be instrument of particular economic and social sectors. The export industry will have to adjust, just like the exporters in other countries who have experienced increases in the value of their currency against the dollar.