Bank of Israel Governor Dr. Karnit Flug announced Friday that she will not be seeking a second term in office.
Israel's central bank chiefs are named for a five-year term and are subject to a two-term limit.
Flug notified Prime Minister Benjamin Netanyahu of her decision on Thursday. Her five-year term ends in November.
In a statement issued Friday, Flug said the bank has played a "notable role" in the robustness and stability of Israel's economy in recent years.
"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.
"I will end my tenure with a feeling of great satisfaction, as the Bank of Israel has a notable role in the robust state and the stability displayed by Israel's economy in recent years, as well as in the analysis and the promotion of discussion regarding the considerable challenges we will face in the coming years," the statement said.
She stressed she will "continue to lead the Bank of Israel in all of its functions, particularly the conduct of monetary policy," until her successor's term begins.
Netanyahu issued a statement thanking Flug for her service, adding he "greatly appreciates her contribution to the Israeli economy."
Flug, named as the first woman to serve as Israel's central bank chief in 2013, was not Netanyahu and Finance Minister Moshe Kahlon's first choice for the role, and over the past few months the latter has hinted that he would not endorse her for a second term.
Flug and Kahlon repeatedly locked horns, especially over his policies on the housing crisis.
The governor is an outspoken critic of Kahlon's "Buyer's Price" affordable housing program – one of the Finance Ministry's flagship schemes – which Flug has described as "grossly lacking" and as one that could be detrimental to Israel's economy.
In March, the Organization for Economic Cooperation and Development warned that Israel's housing bubble could see a "severe" correction, which could adversely affect the economy as a whole.
As the search for Flug's successor begins, several senior financial establishment officials are said to be in the running.
These include former Finance Ministry Accountant General Michal Abadi-Boiangiu, who was shortlisted for the role in 2013, before it was offered to Flug; Deputy Governor of the Bank of Israel Dr. Nadine Baudot-Trajtenberg; Accountant General Rony Hizkiyahu; former head of the National Economic Council Dr. Manuel Trajtenberg; Professor Zvi Eckstein of the Interdisciplinary Center Herzliya, who was nominated for the role in 2013, and senior economist Professor Rafi Melnick.
Netanyahu may also choose to "import" the next central bank chief, as he did with Jacob Frenkel, who was governor between 1991 and 2000, and with Stanley Fischer, whose term spanned from 2005 to 2013.
In the past, the prime minister also nominated Professor Mario Blejer, who was president of the Central Bank of Argentina in 2002, and sources familiar with the issue said Netanyahu is likely to nominate him for the role again.
The final candidates for the position of governor of the Bank of Israel will have to be confirmed by the Public Service Nominations Committee.
