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The New Bank of Israel Conference Honoring Stanley Fischer Jerusalem, June 18, 2013

Inflation Targeting, Disinflation, & Exchange-Rate Policies. Jacob A. Frenkel Chairman, JP Morgan International Former Governor, Bank of Israel. The New Bank of Israel Conference Honoring Stanley Fischer Jerusalem, June 18, 2013. The Rate of Inflation.

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The New Bank of Israel Conference Honoring Stanley Fischer Jerusalem, June 18, 2013

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  1. cmsdtp\2002\0201\02010005.ppt Inflation Targeting, Disinflation, & Exchange-Rate Policies Jacob A. Frenkel Chairman, JP Morgan International Former Governor, Bank of Israel The New Bank of Israel Conference Honoring Stanley Fischer Jerusalem, June 18, 2013

  2. cmsdtp\2002\0201\02010005.ppt The Rate of Inflation Date: January 2002 Note: data for 2001 refers to November 2001

  3. cmsdtp\2002\0201\02010005.ppt Current Account Deficit as a Percent of GDP Date: January 2002

  4. cmsdtp\2002\0201\02010005.ppt Foreign Exchange Transactions: Capital Versus Trade Flows* * The sum above the columns indicates average cumulative change in transactions p.a. ** Including Unilateral transfers Date: November 2001

  5. cmsdtp\2002\0201\02010005.ppt Shekel Exchange Rate vs Basket & USD (1)July 1985 - May 1989 2.1 band 3% 2.0 Adjustment of 3% 8%v. basket 1.9 Basket 1.8 10% Shekels 1.7 US$ 1.6 1.5 1.4 1.3 1.2 III IV I II III IV I II III IV I II III IV I II 1985 1986 1988 1989 1987

  6. cmsdtp\2002\0201\02010005.ppt Shekel Exchange Rate Basket (2) January 1989 - March 1992 Shift in band mid-point: NIS 10% 2.40 Shift in band mid-point: band 2.30 6% +5% 2.20 Shift in band mid-point: band -5% + 3% 2.10 6% band - 3% 2.00 + 3% - 3% 1.90 1.80 I II III IV I II III IV 1989 1990

  7. cmsdtp\2002\0201\02010005.ppt Shekel Exchange Rate versus Basket (3)March 1990 - June 1992 NIS Shift in band mid-point: band 2.70 Shift in band mid-point: 5% +5% 2.60 10% +5% 2.50 -5% 2.40 -5% band 2.30 +5% 2.20 -5% 2.10 2.00 1.90 1.80 II III IV I II III IV I II 1990 1991 1992

  8. cmsdtp\2002\0201\02010005.ppt Shekel Exchange Rate versus the Basket (4)Early 1992 - June 1994 3.6 6% slope 3.4 +5% 8% slope 3.2 -5% Band with9%slope +5% 3.0 -5% 2.8 +5% -5% 2.6 2.4 I II III IV I II III IV I II III IV 1992 1993 1994 Date: April 2001

  9. cmsdtp\2002\0201\02010005.ppt 5.4 4.9 4.4 3.9 3.4 2.9 Shekel Exchange Rate versus Basket (5)July 1994 - January 2001 6% slope 6% slope +7% 2% slope 5 4% slope + % -7% - 5 % III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I 1995 1996 1997 1998 1999 2000 Date: April 2001

  10. cmsdtp\2002\0201\02010005.ppt Shekel Exchange Rate versus Basket (6)January 1997 - January 2002 5.5 Slope 6% 44.0% 5.0 NIS per unit of basket Slope 6% 4.5 +7% 4.0 -7% Slope 2% Slope 4% Slope 0% Slope 6% 3.5 Jan-97 Jan - 98 Jan-99 Jan-00 Jan -01 Jan-02 Date: December 2001

  11. cmsdtp\2002\0201\02010005.ppt Trade in Options and Futures as a Share of Total Foreign Exchange Transactions 25% 20% Exponential Trend 15% 10% 5% Moving Average 0% Jul - 94 Jan - 95 Jul - 95 Jan - 96 Jul - 96 Jan - 97 Jul - 97 Jan - 98 Jul - 98 Jan - 99 Jul - 99 (incl. TA stock exchange Date: 28 July 1999

  12. cmsdtp\2002\0201\02010005.ppt Inflation Expectations Indicators: Capital Markets 8.4 7.7 Percent 3.7 3.3 2.7 Ave. Forecasters Date: January 2002

  13. cmsdtp\2002\0201\02010005.ppt Change in the Monthly CPI Ave. 12/98 to 11/01: 0.1% Ave. 7/97 to 8/98: 0.3% Date: November 2001

  14. cmsdtp\2002\0201\02010005.ppt Change in the Annual CPI * Note: data for 2001 refers to November 2001 Date: January 2002

  15. cmsdtp\2002\0201\02010005.ppt Inflation Rate* and the Inflation Target 14.5 11.0 Percent 10.0 10.0 10.0 8.0 7.0 4.0 4.0 3.5 3.0 3.0 3.0 2.5 2.0 1.0 * Previous 12 months Date: December 2001

  16. cmsdtp\2002\0201\02010005.ppt The Bank of Israel Monthly Interest Rate and Inflation Expectations Bank of Israel Interest Rate Percent Inflation Expectations Date: December 2001

  17. cmsdtp\2002\0201\02010005.ppt Bank of Israel Interest Rate In Nominal and Expected Real Terms BoI Nominal Interest Rate Percent Expected Real Interest Rate Expected real interest rate = Effective Bank of Israel interest rate adjusted for inflation expectations Date: December 2001

  18. cmsdtp\2002\0201\02010005.ppt NIS Depreciation & CPI Differential with US Depreciation Inflation Differential Cumulative since January 1997 Date: November 2001

  19. cmsdtp\2002\0201\02010005.ppt Israel’s International Credit Ratings A2 Moody’s A3 A- BBB+ Institutional Investor BBB BBB- S&P Date: November 2001

  20. cmsdtp\2002\0201\02010005.ppt International Credit Rating and Inflation1986 to 1999 1.6 1.5 1.4 1999 1996 1997 1998 1.3 1994 1995 1.2 Israel's rating/sample average 1993 1.1 1992 1991 1 1990 1989 1988 0.9 1987 0.8 1986 0.7 1 6 11 16 21 Inflation Source: Institutional Investor, semi-annual survey Increase = improvement relative to sample (about 100 countries) Date: January 2000

  21. cmsdtp\2002\0201\02010005.ppt Growth Rate of GDP Date: April 2001

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