Bank of Israel Governor Dr. Karnit Flug has been dubbed by the Bloomberg news agency as being "top of the class" among central bankers across the developed world, especially when it comes to defeating predictions on Israel's benchmark interest rate. According to a Bloomberg article published Monday, since taking office in July 2013, Flug has issued six rate decisions that all but defeated projections -- more than any other central banker among the 34 member nations of the Organization for Economic Cooperation and Development. Most recently, Flug's decision to both set and keep Israel's key interest rate at 0.1% has sent analysts reeling. The Bank of Israel's Monetary Committee is expected to announced the benchmark interest rate for May on Monday afternoon. Bloomberg predicts that "while 17 of 20 forecasters expect the Bank of Israel to hold its 0.1% benchmark rate on Monday, three predict a cut." According to Bank of Israel data, the shekel has appreciated more than 7% against the dollar, euro and other major currencies since December. The report noted that as exports account for a third of Israel's economy, the shekel's strong performance is something the central back is actually trying to curb, to assist exporters. "The Bank of Israel's policy has become a function of the exchange rate," Ori Greenfeld, chief economist at Psagot Investment House told Bloomberg. "To forecast where the currency is headed -- I don't think anybody can do that. So predicting where the interest rate is going has become very, very difficult." Greenfeld suggested the element of surprise in Flug's decisions might be deliberate, saying, "If your main goal is to affect the currency market, than you can't be transparent. To influence the market, there has to be a surprise." Alex Zabezhinsky, chief economist at Meitav Dash Investment House, told the agency he believes the Bank of Israel's policy is "ineffective." "The market doesn't understand the BoI's considerations. It's not as though there is some catastrophe in the economy that justifies strong, unconventional steps. It's clear that the shekel is being influenced by economic forces. And therefore investors were surprised again and again," he said. The Bank of Israel projects that the Israeli economy will grow by 3.2% in 2015 and 3.5% in 2016, up from 2.8% in 2014. Unemployment rates are expected to shrink to 5.5%, according to the bank's forecast.
Bank of Israel chief's decisions among OECD's 'most surprising'
Bloomberg finds central bank head Dr. Karnit Flug to be the most unpredictable of her peers in the developed world • Analyst says the element of surprise may be deliberate: "If your main goal is to affect the currency market, you can't be transparent."
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