Bank of Israel head won’t seek a second term

Published: JULY 7, 2018 19:47

Karnit Flug (photo credit: MARC ISRAEL SELLEM) — Karnit Flug

(photo credit: MARC ISRAEL SELLEM)

Flug notified Prime Minister Benjamin Netanyahu of her decision on Thursday, according to a statement from the central bank.

Bank of Israel Governor Karnit Flug will not stand as a candidate for second term, after her five-year tenure ends in November.

Flug notified Prime Minister Benjamin Netanyahu of her decision on Thursday, according to a statement from the central bank.

“I was privileged to head an organization of the highest quality, which works with professionalism, dedication and loyalty, and that on a daily basis lives up to the vision it set for itself — to be among the most advanced central banks and to contribute to the prosperity of Israel and the welfare of its citizens,” Flug wrote in a letter to Netanyahu.

Flug also asked the prime minister to ensure the central bank’s independence in setting monetary policy – when selecting a successor.

In a notably curt response – omitting most of the traditional compliments – Netanyahu thanked Flug for her service in a one-line statement.

The move by Flug comes amid political infighting between Flug and Netanyahu, with the central bank governor also jostling with Finance Minister Moshe Kahlon.

Previously, Flug and Kahlon have battled on a number of issues, specifically after the finance minister pushed for further business tax cuts that add to the deficit.

The central bank governor has pointed out that despite a strong economy and record low unemployment, Israel’s deficit grew 1.4% last year – leaving little wiggle room for stimulus spending during a recession.

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In April, after Flug criticized Kahlon’s affordable housing plan – “Mehir L’mishtaken” – the finance minister indicated that he would look for other candidates to replace her.

Her tenure as governor has been relatively uneventful – given that Israel’s interest rate has remained close to zero, taking away a key policy instrument that the bank could use.

Flug, 63, will continue serving as head of the bank until her term ends on November 12. She has served for nearly five years, taking over after Stanley Fischer stepped down in 2013.

Unlike Flug, Fischer held the ear of prime ministers and the Treasury. Part of that was because Flug was not Netanyahu’s first choice for the position – despite being recommended by Fischer.

She previously worked at the International Monetary Fund and has a PhD in economics from Columbia.