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The governor will raise the interest rate in the economy today, what will happen to our pockets? - Walla! Of money

2023-04-03T16:01:25.744Z


Interest in the economy will rise today at a rate of 0.25%-0.50%. How does this happen, what does it mean for our pockets and why what is equally interesting is not what Prof. Amir Yaron will do, but also what he will say?


The interest rate in the economy will be updated regardless of the legal legislation, but according to the governor - there may be a great impact (Photo: Flash 90, Flash 90)

In the afternoon the governor of the Bank of Israel will publish the decision of the monetary committee and will update the interest rate in the economy.

It is estimated that the governor will settle for a relatively moderate increase in the interest rate, i.e. - 0.25%, but there is a possibility that the increase will be double, i.e. 0.5%.

A decision not to raise interest or alternatively - to raise it by more than half a percent, will be a big surprise.



Why is the interest rate increasing?

The interest rate increase is intended to make the price of money more expensive, that is - we will pay more for the money we buy, minus the account, loans and mortgages.

The fear (for example) of increasing the deficit, should shrink our consumption and curb the rise in prices.

All this in theory.



Why only in theory?

Because at least so far, the interest rate - not only in Israel but in most countries of the world - has risen, and despite this has not been able to suppress the inflation that has emerged in the post-corona era.

Despite the only moderate effect of the interest rate increases on the index, it seems that countries that started the process even before Israel (for example, the USA) are already seeing an effect on inflation, and the expectation is that this will be the case in Israel as well. In recent days, estimates have been heard that although the interest rate will remain high at least until the end of



2023 , inflation will go and converge to the target area (that is, up to 3% per year) and will allow the Bank of Israel to stop raising interest rates - and later even lowering them. So



inflation has not yet been curbed and the February index was relatively high. The improving labor market (3.9% unemployment) also signals to the governor that it is possible continue to raise the interest rate.



Those who do feel the interest rate increase, even well, are the contractors.

The prices of the apartments (in general) have been curbed and the prices of the new apartments "from the contractor" have even suffered decreases.

Mainly the luxury apartments were affected, but not only them.

As long as the interest rate continues to rise, the money is expensive (relatively) and mainly accompanied by the fear that it will not be possible to plan the mortgage repayments so that they match the monthly income, the accuracy market will continue to falter.



It is no coincidence that the representatives of the contractors were among the first to protest against the governor's policy, some of them even rushed to send prepared "reactions" in advance to the increase that has not yet happened.

After a dream period, many entrepreneurs and contractors discover the less pleasant side of the industry: financing is expensive, sales falter and the discounts given to the public erode the entrepreneurial and contracting profit.



Perhaps we have not yet heard of bankruptcies in the industry, certainly not on a large scale, but there are already entrepreneurs who have purchased expensive and leveraged land and are forced to dispose of it at loss prices, in order to service the debt to the banks.

Money is getting more expensive.

What does it mean for the public in Israel? (Photo: ShutterStock)

The public will pay

The public may not be stupid, but the public pays: the minus in the bank has become more expensive, along with it the monthly repayment of the mortgage has also become more expensive: those who took low-interest mortgages, only a little over a year ago and adjusted it responsibly to their monthly repayment capacity, found themselves in a hole - especially if the amount involved high loan



Although the banks have gone a long way towards customers who find it difficult to meet the monthly settlement, it is important to understand that there are no free meals with the banks: even those who "benefit" from the freezing of the payments and a rescheduling, will pay the full interest on them.



And what's more: there is no disputing that the cooling of real estate prices in Israel is a national interest, but in a situation where the demand for housing is high, due to the rate of natural increase (a phenomenon unique to Israel in the OECD countries), this is not a solution to the problem, but the opposite: it is a freezing of a situation Problematic. The housing seekers have not disappeared. On the contrary - they are only increasing, even if for the time being they remain living in rent or in their parents' house.



Another painful point is the unbearable difference between the money that the bank sells to us (as mentioned: loan, minus - credit line and mortgage) and the money that it buys from us in the form of deposits.

In other words: even those who managed to put some money aside, do not see good returns on the deposit.

Who does see?

The banks for whom 2022 was the year of the interest rate increase, a dream year with an aggregate profit of tens of billions of shekels.

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Prof. Amir Yaron, Governor of the Bank of Israel.

The things he will say after the publication of the Rabbi's decision, this time will have greater significance than the Rabbi's percentages themselves (Photo: Image processing, Flash 90, Yonatan Zindel)

What will the governor say?

In the old days, the Rabbi's decision became the main news.

But times are not theirs: the State of Israel is torn by an internal struggle, in which - for the first time in the history of the State of Israel - all the heads of the economy took sides and took a clear position, even knowing that they had something to lose.



Harel Wiesel and FOX may be an easy target for those who oppose the protest, but by their side stood all the heads of major banks in Israel, chairmen and CEOs of retail chains, high-tech companies, importers, and more.

Some of them arrived there after recognizing a call of direction from the governor, Prof. Amir Yaron.



True, this is a pleasant man who does not use harsh language and does not tend to yell or threaten, but precisely because of this, his quiet but clear criticism against the government's legislative initiatives, acted like wildfire.

While he is receiving criticism from politicians, some of whom are unable to calculate interest rates - the senior members of the economy have already wanted to protest at the President's residence.



A little after them came the Histadrut - and within it also the big committees, people who not only warn but can also paralyze the country from now-to-now, as indeed happened for a few hours exactly a week ago.



Therefore, what the governor will say will have a much greater meaning than the question of whether the interest rate will increase by a quarter percent or half a percent.

If, in his words of explanation for the decision, the situation would also require, especially in view of what appears to be an impasse in the negotiations (which are doubtless destined to succeed from the beginning), then it is possible that precisely the solid and moderate man, the academician appointed to his position by Netanyahu, will be one of the catalysts of the protest that may have been a little forgotten these days The latter, but did not fade.

  • Of money

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  • Amir Yaron

  • Bank of Israel Governor

  • Bank of Israel interest rate

Source: walla

All business articles on 2023-04-03

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