Prof. Amir Yaron, Governor of the Bank of Israel.
One of the busy priesthoods: election campaigns, corona, inflation and dessert - legal reform-revolution (photo: Flash 90, Flash 90)
The decisions of Bank of Israel Governor Prof. Amir Yaron to raise the interest rate by 0.25% on the eve of the holiday and also to warn of the dire consequences of the legal revolution, received criticism from Ruthin not only from interested parties in the business sector, but also from the political system.
Communications Minister Shlomo Karai and Diaspora Minister Amichai Shikli
harshly criticized the decision and claimed that the governor is showing opacity and is dealing with matters that do not belong to him.
The criticism is leveled even though Netanyahu has already warned the ministers not to speak out on the issue and harm the independence of the Bank of Israel.
Therefore, it is difficult to assume that these things were launched against the Prime Minister's will (or at least with the encouragement of his very close cause).
But the governor is not moved by the criticism.
In an interview with Walla, he says:
"We are a free country and everyone has the right to express their opinion. But it is important to understand that the Prime Minister fully understands the importance of the independence of the Bank of Israel. We work both on weekdays and on holidays. There is an orderly process regarding the eradication of inflation, which is bad and makes life bitter for everyone ".
"Inflation particularly hurts the weaker sections. We are aware of the damage and understand that it hurts. We are a professional body and must carry out the professional decisions even when there are opinions here and there. Some opinions simply come from some position."
The Minister of Communications against the Governor.
Although Netanyahu publicly sought to avoid criticism of the Bank of Israel, it is hard to believe that the criticism did not receive the blessing of his close circle (Photo: Flash 90, Olivier Fitosi)
What is it like to lose 150 billion shekels?
The governor spends the stormy Passover away from Israel.
He's off to the spring conference of the International Monetary Fund in Washington, where he'll listen to the erudite words of governors, including Fed Chairman Jerome Powell, things that will be somewhat different, one assumes, than the economic musings of Shikley and Keri
. There are constant pressures, some of them political. How do you deal with them?
"I answer you with the utmost sincerity.
There are various statements, but the decision makers understand the importance of the independence of the Bank of Israel.
We are aware of the pain of raising interest rates but this is to prevent greater pain.
I can reassure everyone: not even a millimeter of politics entered the interest rate discussions."
The Governor further warns of the results of the revolution: "If legal changes are accompanied by an increase in the state's risk premium, an injury to exports, and a decrease in investments and demand for private consumption, there will be an injury of 2.8% of GDP each year in the next three years."
Prof. Yaron does not specify the amount, but we will point out that it is close to NIS 150 billion.
But the high interest rate is seriously harming the citizens and especially the mortgage recipients
"We are aware that the process of returning inflation to the target is not easy, but we are determined to do so to ensure price stability" answers Prof. Yaron and adds:
"Inflation makes life more expensive for everyone, erodes purchasing power and hurts everyone. The mortgagees have to pay back another 775 shekels per month for the mortgage within two years. This is not a small amount and it is clear that it hurts. If the situation allows and we will soon see a moderation of inflation, we will be close to the end of interest rate increases."
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The President of the State with the opposition's negotiating team. "As soon as the issue of the legislation is resolved by broad agreement, the damages will disappear quickly" (photo: official website, the President's House)
Consensual legislation will restore the damage to the economy
It is difficult to get an answer from the governor as to whether the legal revolution is already causing immediate damage to the economy and the economy: "We are within three months of the start of the events. There is currently no orderly estimate of the damage that occurred, but we are following the data, including those of the stock exchange. Investors are still sitting on the fence. As far as the issue of the legislation will be resolved by broad agreement, the damages will disappear quickly."
"Naturally, an economy with a high level of uncertainty is harmful to the economy. We are already seeing a severe drop in recruitments on the stock market. There is also active talk that investors are on the fence and will not take risks. We are following the data and there is no unusual activity of spending money abroad, "but there are withdrawals Funds from deposits in banks and the money goes mainly to financial funds that have become attractive thanks to the issuances supported by the Bank of Israel."
Silicon Valley, the high-tech bank that collapsed.
Are the banks in Israel stable?
The governor recognizes a trend of withdrawing from deposits, but, at least for now, not transferring funds abroad (Photo: GettyImages, Justin Sullivan)
Are the banks in Israel stable?
The collapse of banks in the US has raised questions about the stability of the Israeli banking system and the governor is required to address this issue as well:
"Banks in Israel are stable and resistant to shocks thanks to close supervision.
The banks provided a certain response to Israeli companies that were exposed to the collapse of Silicon Valley Bank.
The system maintained stability over time and weathered the 2008 crisis. Financial stability is unfortunately taken for granted, but it is clearly important
," says the governor and adds:
"To this day there is no formal deposit insurance, but in practice it exists.
To date, the system has protected the depositors in the event of a bank collapse.
The US has deposit insurance, but we saw that it didn't exactly help. In light of the events of the bank collapse, the issue of deposit insurance will be re-examined at the international level."
The governor with bills bearing his signature.
He avoids an explicit answer, but it is likely that he will not continue for another term (Photo: Yehats)
And what about another term of office?
The governor finishes his term at the end of the year, and in view of the criticism he is being asked whether he intends to continue for another term or retire and return to the US as expected. The governor's answer is meandering, not to mention evasive: "I work 24/7
to promote the Israeli economy and its representation in the world in the best possible way.
The governor is a particularly difficult position in Israel.
I went through four terms of the government.
We will talk about the continuation of the term further down the road."
"We are a free country and everyone is allowed to talk about what they want about the continuation of my term.
Since this is a very sensitive issue, I prefer not to comment on my position on the issue."
On the eve of the appointment to the position, was this what the position of the governor of the Bank of Israel looked like?
"I was definitely surprised by the intensity of the events.
This is not what I thought the role would look like.
During my term of office there were so many events that included election rounds, the Corona incident, inflation and Operation Wall Guard, no one, not even I, took into account that this would happen in four years."
Of money
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Amir Yaron
Bank of Israel Governor