Today the interest rate will be updated: how much more will we pay for the minus in the bank?
Inflation in Israel, according to the August index, is decreasing, but still higher than the upper target.
Therefore, it is estimated that the Governor, Prof. Amir Yaron, will continue with the policy of raising the interest rate and align with the American Fed, which raised the interest rate by 0.75%
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Of money
03/10/2022
Monday, 03 October 2022, 10:34 Updated: 10:54
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Governor of the Bank of Israel, Prof. Amir Yaron, with Finance Minister Avigdor Lieberman.
It is not certain that even the Treasury is enthusiastic about the sharp increase in interest rates (photo: Ministry of Finance spokespersons)
Today at 16:00 the Bank of Israel will publish the updated interest rate in the economy.
Only half a year ago, in April 2022, the interest rate in the economy stood at 0.1% - and since then it has risen, in several strokes, to a rate of 2%.
The expectation for the bank's announcement today: a further increase in interest rates in the economy at a rate of 0.5%-0.75%.
Apparently the governor, Prof. Amir Yaron, could not raise the interest rate, relying on the August index that "reduced" the annual inflation percentage from 5.2% to only 4.6%, but even the reduced inflation is higher than the top target set by the Bank of Israel, 3% inflation per year
The meaning, at least in the short term, is a policy that benefits savers, i.e. those who have a surplus in their account or who hold deposits and other index-linked savings, but further worsens the situation of borrowers: anyone who is in a debt balance (minus) at the bank, anyone who has taken out a loan or anyone who repays Every month the mortgage payments.
The chairman of the American Fed, Jerome Powell. The governor of Israel is following his lead even though inflation in Israel is low compared to inflation in the US (Photo: GettyImages, Drew Angerer)
It is important to note that there is logic in the Governor's attempt to reduce inflation: the increase in prices mainly hurts the weaker sections.
However, until the increase in price is curbed, those who need to finance it (as mentioned - through loans or a debit balance in the current account) will discover that the money they need has become even more expensive.
Moreover - against the background of the August data, some have wondered whether the interest rate needs to be updated at all, since On the one hand, this is an attempt to align with most of the central banks in the world (in the USA the interest rate was raised by 0.75% only about ten days ago), but on the other hand, inflation in Israel is still far from that recorded in the USA - 8.3% or in the UK - 10.1%, so Perhaps it would have been possible to behave moderately with the Israeli economy.
The proponents of the interest rate hike also point out that the August index was low due to the drop in fuel prices, while prices in almost every other area did not go down or even went up.
In any case, it is estimated that as long as the monetary policy of the governors of the central banks in most countries of the world that suffer from inflation is to fight it by raising interest rates, Israel will continue to align with most Western countries - and interest rate increases will continue even into 2023 (as the governor previously said) until to achieve inflation of less than 3%.
At the same time, the Bank of Israel is also expected to update downward the growth forecast in the economy, although this will still remain high compared to most economies in the world.
All the answers - tonight at 16:00.
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Bank of Israel Governor
Amir Yaron
Bank of Israel
The interest rate in the economy
