Karnit Flug named as Bank of Israel governor Karnit Flug has been chosen as head of the Bank of Israel, ending a four-month interregnum at the top of the institution that unsettled the business community and brought widespread criticism of the prime minister. The government confirmed on Sunday that Benjamin Netanyahu, prime minister, and Yair Lapid, finance minister, had appointed Ms Flug, the deputy governor who has been acting governor at the central bank since Stanley Fischer stepped down at the end of June. Ms Flug is the first woman to head the central bank. Despite being been recommended for the post by Mr Fischer, she had been passed over twice for the job, prompting accusations of sexism and a bungled appointment process against Mr Netanyahu from opposition MPs and the Israeli business press. "We have been impressed by Dr Flug's performance as acting governor in recent months and we are certain that she will continue to assist us in moving the Israeli economy to additional achievements in the face of the global economic upheaval," Mr Netanyahu and Mr Lapid said in a joint statement. Ms Flug has been the Bank of Israel's deputy governor since July 2011, and served in the past as an economist with the International Monetary Fund and the Inter-American Development Bank. However, she has spent the bulk of her career at the Bank of Israel and is seen as a relatively moderate choice for a prime minister who favours the staunchly monterarist Chicago school of economics. Mr Netanyahu had looked overseas for another internationally renowned figure like Mr Fischer, who is credited with helping to steer Israel's economy successfully during the financial crisis. Mario Blejer, a former governor of Argentina's central bank, was shortlisted for the post, and Israeli media reported at the weekend that Mr Netanyahu had offered the job to Lawrence Summers, former US Treasury secretary, who turned it down. Mr Netanyahu and Mr Lapid's first two nominations for the job both withdrew. Jacob Frenkel, their first choice, dropped out in July after questions were raised about his arrest at Hong Kong's airport after being accused of stealing a bag from a duty-free shop. The international financier and economist described the incident as a misunderstanding. Leo Leiderman, chief economist at Israel's Bank Hapoalim, withdrew in August, citing undisclosed personal reasons. Ms Flug had been serving as acting governor since July 1, but said she planned to step down after being snubbed a second time for the job. Responding to Ms Flug's appointment, Shelly Yachimovich, head of the opposition Labour party, said: "Although the appointment process was flawed and at times ludicrous, Netanyahu ultimately recognised and amended his mistake. The correct decision was taken. Yaacov Sheinin, a former vice-chairman of the advisory committee to the Bank of Israel, said that Ms Flug's decision last month to cut interest rates by 0.25 of a percentage point, despite opposition from some of her colleagues on the bank's monetary committee, showed she had the mettle and independence needed for the job. "That gives me a sign that she knows how to take a stand on issues that matter to the economy, and that's good," he told reporters on a conference call organised by the Israel Project, an advocacy group. She will take office at a time when Israel is trying to narrow a budget deficit and deal with an appreciating shekel, and is engaging in a heated public debate about high living costs and how the spoils of the country's wealth should be divided. During his term as governor, Mr Fischer warned of the risks of spiralling housing costs and a "dangerous" mood of populism among many of the new members of the Knesset elected to the Israeli legislature in January. He had also warned about the threats to Israel's long-term economic competitiveness from low employment and education levels among Israel's growing Arab and ultra-Orthodox minority communities.