Press conference, Bank of Israel Governor Amir Yaron interest rate increase/Bank of Israel
This was one of the most intriguing interest rate decisions made by the Monetary Committee of the Bank of Israel headed by Governor Prof. Amir Yaron.
In the end, it was decided to leave the interest rate unchanged, and it is good that the governor did so.
But right up until the last moment there were differences of opinion on the question of whether the interest rate would drop again this time or whether it would remain unchanged.
On the one hand, the low inflation converging to the target areas, the negative GDP figures per capita in 2023 and the need to encourage investments in the economy and especially in the real estate market justified the continued decrease in interest rates, after on January 1 it had already dropped to 4.5%.
On the other hand, the high employment figures, the revival In terms of consumption from the beginning of 2024, the budget deficit and above all the fear that has not yet dissipated from a flare-up in the north that would boost the dollar and inflation, justified the conservative approach.
This is also the main reason the governor cited in his decision not to lower the interest rate and explained: "The war has significant consequences both on the real activity and on the financial markets and the risk premium of the economy is still high."
In criticizing the 2024 budget, he added: "The expansionary fiscal policy and its effects, and the restrictions on activity in the construction sector still pose a risk to the moderation of inflation."
Yaron and Smotrich at a work meeting.
The governor punished the finance minister/finance spokeswoman
If you want, the governor is also waiting for "total victory", a vague term that Netanyahu claimed.
In the bottom line, with this decision, the Governor punished the Minister of Finance Bezalel Smotrich and indirectly the public of mortgage recipients and overdraft addicts.
The governor had no justification to give an award to the Minister of Finance for promiscuous behavior in the 2024 budget that manifested itself in a 6.6% deficit at this stage which may continue to grow.
Prof. Amir had no reason to spit in the face of the credit rating companies, including Moody's, which had already downgraded the economy.
The decision was made because of justified caution by the governor.
Although the interest rate is expected to drop during the year two or three more times (below 4%), but not this time.
Maybe it will happen in the next decision on April 8.
Until then we will live and see.
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"The risk premium of the economy is still high," explained the Governor/Government Press Office, Kobi Gideon
This is a particularly painful decision for the pocket but one designed to keep us from ourselves.
Every employee in the economy understands that inflation and the erosion of wages first and foremost harms his purchasing power.
He feels that a shopping cart at the supermarket that cost NIS 350 a year ago suddenly costs NIS 400.
Instead of the government being the one to impose the economic decrees designed to reduce the deficit (by raising taxes for example), leave the dirty work to the governor.
Indeed a high interest rate hurts a lot.
It hurts every young couple who use the mortgage at an interest rate of 7% per year while the interest on the plus is about 3% per year.
She is cruel to overdraft consumers who the banks issue a coupon of 10% per year while on a random plus balance they get maybe 1% per year.
It is no coincidence that the decision was made with great disappointment, especially among the business sector, led by the president of the trade association Uriel Lin and the president of the independent organization Roy Cohen who wished that the interest rate would drop this time too, but it did not happen.
The address for complaints is the Minister of Finance.
More on the same topic:
interest
Bank of Israel interest rate
The interest rate in the economy
Amir Yaron
Bank of Israel
War of Iron Swords
Gaza war
mortgage
Overdraft
Moody's
Credit Rating