Its our turn to add to the Fischer-for-Fed chorus, following news the Israeli central
bank governor is stepping down on June 30.
Mark Carney, Bank of Canada governor and Bank of England
governor-designate, there are few central bankers whose
reputations have grown in the crisis era, with the market
consensus decreeing Fischer has been consistently ahead of the
monetary curve since he was appointed in 2005.
Although Fischers mandate has recently been diluted, the
Bank of Israel is unique since monetary policy decisions are
made by the governor alone, which means Fischer deserves any
credit or blame for the monetary stance since 2005.
| Fischer. Source: Reuters
The former IMF deputy managing director's astute policy
moves, pre- and post-Lehman, has boosted his status as a hugely
respected economic soothsayer, whose pronouncements are
observed globally transcending the influence of the
$240 billion+ Israeli economy.
Euromoneys Central Bank Governor of the Year in 2010
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
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
Thirdly, on October 6, 2008 Fischer cut Israels
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
Lastly, in January 2012, Fischer cut rates again
anticipating monetary loosening globally as he rightly
judged growth fears would outweigh inflation concerns.
Aside from BoI's ahead-of-the-curve monetary stance,
Fischers long-standing academic and real-world
pronouncements on the power of communication to buttress
market confidence echoes Carney and the
Feds recent embrace of forward-rate guidance.
In addition, Fischers tenure at the BoI and
academic research on the flexibility of an inflation-targeting
regime taking into account supply-side shocks
have fed speculation that he has implemented nominal GDP targeting in Israel, a stance
that swims with the emerging transatlantic monetary
tide. (Indeed, Fischer, like Carney in his capacity
as Bank of England governor-designate, has
also broken new ground by becoming an Israeli citizen in
order to lead the BoI, underscoring the global free-market in
monetary policy labour.)
More generally, as an Israeli policymaker an
economy that straddles the fine line between developed and
emerging status he understands the impact of Fed policy
on foreign capital volatility and exchange rates, providing a
rare global dimension to Fed policy. (A perspective that would
no doubt be viewed more favourably in Sao Paulo and Beijing
than in Washington.)
His tenure would obviously intensify the debate over the
legitimacy of activist central banks at a time of so-called
global currency wars, while possibly signaling the
USs willingness to engage with the question of the
role of international monetary cooperation to address
In sum, Fishers intellectual pedigree, on-the-money
policy moves and failed IMF leadership bid laying bare
his pent-up global ambitions mean Fischer deserves to be
in the running, alongside
Federal Reserve vice-chairman Janet Yellen.