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The governor of the Bank of Israel, Amir Yaron, went out this evening (Monday) in a round of interviews because of the higher than expected increase in interest rates and the criticism directed at the Bank of Israel.
Criticism was voiced by Foreign Minister Eli Cohen, Chairman of the Economic Committee David Bitan. In the business sector, the decision was reviewed by Industrialists President Ron Tomer, Business Sector President Dovi Ameti and Chairman of the Independents Organization Roy Cohen.
Governor, did you miss the inflation forecast again?
"Look. When you try to analyze the decision, then of course you look at the data, the economy is in high activity and GDP and employment are high. The last index was higher and you also see that core inflation is more sticky. The current decision takes into account the balance between inflation risk and activity in the economy. Despite the surprise in the index, expectations show Let us return to the inflation target at the end of the year or at the beginning of 2024. All of this would not have happened without the determination of the interest rate countries. My main role is to maintain price stability, which is a basic condition for a growing economy. We do it through the interest rate and know that it hurts. It is impossible to lower inflation without some pain ".
"Inflation cannot be lowered without pain."
Prof. Amir Yaron (photo: image processing, Flash 90, Yonatan Zindel)
But this is the highest interest rate since 2007 and the highest jump in less than a year.
"You are right, but we see that in light of what happened after the exit from the corona and following the war in Ukraine, all the central banks were in the process of accelerating increases. When the previous forecast was published, I said that if the data were stronger, we would have to have a higher interest rate than the forecast."
In the current situation, is there a possibility of another interest rate increase?
"Most of the increases are behind us and we will act according to the data. Everything depends on the data. After the step we took, we are behind the large part. We depend on the data and will act accordingly. Following the decision, political pressure was applied. How do you react to that?" My job is first of all to promote and preserve the economy and eradicate the inflation.
I also represent Israel and talk to all the world parties and show the strength of the economy.
Our job is to do what is right for the economy.
Inflation must not be allowed to have fun.
The monetary committee is independent.
Contrary to what the foreign minister said, inflation has not moderated.
We are a strong economy with an index that rose above expectations.
The independence of the central bank and the governor are critical to the economy.
In countries where the independence of the central bank has been compromised, this has led to destruction in the economy and I am sure that the decision makers understand this.
"We see all kinds of laws entering the world of banking, such as freezing interest rates or interest on deposits. Objectively, they will miss the mark. Essentially, they are incorrect, but they harm the economy and are an interference in the market economy. That is why the independence of the Bank of Israel is important so that the economy is not seriously harmed. Political interference Bad for the economy also in terms of image.
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"Specific problems are solved by the banks"
How do you relate to the legal reform and the economic consequences?
"There are many studies in the economy that show that independent and strong institutions are an essential component of a prosperous economy and it is not just that international bodies are diagnosing the issue. It is very important to maintain the independence and strength of the legal institutions in every process and it must be done in an orderly manner with transparency and broad agreement. This will minimize business uncertainty We at the Bank of Israel are talking to the bankers. When we look at the macro level, we do not see any significant abnormal activity of currency withdrawal. Looking ahead, it is important to maintain the independence and strength of all institutions in Israel."
What do you say to the borrowers?
"I am aware of the pain of the mortgage recipients, but inflation cannot decrease without this pain. Mortgages are currently given in a conservative manner. In the process of raising the interest rate, of course, we also constantly include the social cost and understand the pain. Loans in Israel are given in a conservative manner, therefore at the level of system stability or from the side of the situation Most citizens do not have a problem. Specific problems are solved by the banks.
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