UPDATE 3-Leo Leiderman chosen to head Israel's central bank
JERUSALEM, Aug 1(Reuters) - Leo Leiderman, chief economist at Israel's largest bank and a past critic of the low interest rate environment, has been nominated as the next central bank governor.
The decision on Wednesday came after Jacob Frenkel, Bank of Israel chief in the 1990s, withdrew his bid to succeed Stanley Fischer, who stepped down at the end of June after eight years on the job.
The Argentinian-born Leiderman, chief economist at Bank Hapoalim, won the nomination over front-runner and acting governor Karnit Flug.
He brings international credentials, such as serving as head of emerging markets research at Deutsche Bank in the early 2000s.
Leiderman will inherit an economy expected to slow to 2.8 percent growth in 2013 - excluding the impact of natural gas production - tame inflation, and a benchmark interest rate of 1.25 percent. At the same time, Israel's shekel is at a nearly two-year high against the dollar.
"It's now very important to restore the Israeli economy to a growth track," Leiderman said in an interview with the Yedioth Ahronoth newspaper, adding that priorities were increasing exports and investments.
"Give me a hundred days of grace and then you will see that we will start to see results," Leiderman said.
But Leiderman's recent comments had suggested he was likely to have a more hawkish stance than current members of the interest rate-setting Monetary Policy Committee, said Yonnie Fanning, an analyst at ILS Brokers.
Leiderman, who spent 10 years at the Bank of Israel in the 1990s, initially supported steep interest rate cuts at the outset of the global financial crisis but in the past few years has said rates were too low.
His nomination by Prime Minister Benjamin Netanyahu and Finance Minister Yair Lapid still needs confirmation from a committee that vets senior civil servants and the cabinet.
Acting governor Flug, who had been at the Bank of Israel for 25 years and served as deputy governor under Fischer, said she would step down a month after the new governor is in place and gets to know the system.
Frenkel, who was central bank chief in the 1990s and led the charge to sharply reduce inflation, said he withdrew his candidacy due to what he called an "unfortunate toxic and poisonous environment created by the media."
After his nomination, Israeli media said Frenkel, currently chairman of JPMorgan Chase International, was briefly detained at Hong Kong's airport in 2006. Frenkel said the incident had been a misunderstanding with no further consequences. No charges were ever brought.
But media and some opposition lawmakers called for his nomination to be withdrawn despite support expressed by Netanyahu, Lapid and other government officials.
"The incident was not an issue," he told Reuters, explaining why he withdrew. "I was sick and tired of the witch hunt."