Thursday, January 31, 2013

Euromoney: Fischer for Fed Chairman

Euromoney, which chose outgoing Governor of the Bank of Israel Prof. Stanley Fischer as "Central Bank Governor of the Year in 2010," calls for him to be appointed the next Chairman of the US Federal Reserve.

The magazine writes:
The outgoing Israeli central bank governor - and former Bernanke thesis advisor - is one of the best monetary policy officials in the world. His market instincts and astute knowledge of economics endow him with impeccable credentials to lead the Fed in 2014.
EPJ  was first to suggest that Fischer may be considered for the Fed post, when Bernanke's term ends in January 2014.

Euromoney explains how inflationist Fischer was as Bank of Israel's top man:
Fischer helped to shield Israel from the storms emanating from the US syndicated loan crisis between July 2007 and March 2008, stepping up acquisitions of foreign currency reserves and embarking on quantitative easing through the purchases of long-term debt. Secondly, when Lehman collapsed, Fischer insulated the economy from the global storm by weakening the currency, ensuring the export sector was not demolished by an uncompetitive shekel.

Thirdly, on October 6, 2008 Fischer cut Israel’s benchmark rate - one day before monetary policymakers in the US, UK and eurozone coordinated their interest rate cuts. Fischer then cut the rate to a record low of 0.5% by April 2009 and embarked on an aggressive bout of quantitative easing. Lastly, in January 2012, Fischer cut rates - again anticipating monetary loosening globally - as he rightly judged growth fears would outweigh inflation concerns
Here's a chart of Israeli CPI over the last two years. Given the Great Recession price inflation has generally been very subdued in most countries, but not under Fischer's watch in Israel, inflation has been comparatively very strong. Indeed, in 2011, it was as high as 4.3%, more than twice the Fed's current target rate. 


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