Press conference, Bank of Israel Governor Amir Yaron interest rate increase/Bank of Israel
Governor of the Bank of Israel Prof. Amir Yaron participated this morning in the economic conference of Maariv and Walla and addressed the conscription law, the state budget for the next two years and the danger of the credit rating being downgraded by the additional rating companies.
Yaron was asked how Israel is perceived by investors from the US, and said that "it is clear that the Israeli brand and the Israeli sentiment are very important to the economy.
The voices are mixed: on the one hand, we hear a lot of support, people who understand the difficult dealing with the issue of terrorism and war, and on the other hand we also hear criticism of the continuation of the war and the images coming out of Gaza.
I have been talking to many investors and economic factors for a long time, and over time of course the criticism increases, but at the same time the strengths are understood.
We explain to the international bodies the durability of the Israeli economy, and we see stability and capital raising in the markets in the meantime.
On the other hand, we have seen that we are already priced with a higher risk premium, and of course the
internal processes are constantly being observed and tested.
" "
I don't have a crystal ball and I don't know what the other two credit rating companies will decide, but I know that when they come here they talk to the Bank of Israel, and we reflect to them the strengths of the Israeli economy.
We have dynamism, creativity, high-tech which is much stronger in these years than in 2001, during the second intifada.
They understand this and Moody's has also indicated this.
It is very important to convey to them that we are aware of the importance of the budget framework, which will be conservative enough, and within that framework it will be difficult and there will be investment in growth engines."
But we are not talking in theory. The 2024 budget has passed, and the same challenges exist in the budget.
"Regarding the budget, I will say that it has two aspects.
Once the frame, and once the components.
Regarding the framework, I think that significant steps have been taken regarding the adjustments for 2024 and, as the rest of the matter matures, also for 2025."
6 billion shekels are still missing there.
"It is true, the effect is mainly after 2025, but it is important to introduce the carbon tax and the purchase tax, which will bring for the desired adjustments, so that our debt-to-product ratio does not continue to rise.
This is the framework, and within it, what we have not done is much more aggressive steps in favor of growth engines.
We are talking here about things that I have been talking about throughout my years of office.
I am talking about infrastructure, education and core studies.
Make sure there will be a greater participation of ultra-orthodox men.
Without it, the economy will not be able to continue growing."
Yaron at the conference this morning.
"I don't have a crystal ball and I don't know what the other two credit rating companies will decide"/Abshalom Shoshani
On the topic of recruitment, Amir said that, "We are awake to a lively discussion on this topic recently, and I want to refine two aspects. One topic is the topic of employment, as I mentioned. There are two subtopics here. The first is to increase employment, from the topic of allowances to taxes, and to increase the incentive for employment. The second issue is productivity, assuming you manage to get the people into employment. We understand from the defense system that there is a need for more manpower to participate in the systemic support for the military issue. Any law that should be effective in significantly increasing the participation of the ultra-Orthodox in the military service, and all this while not creating negative incentives for employment."
Is the current law effective?
"This law is being rolled out. We have seen that there have been many changes in it, certainly that raising the exemption age does not contribute to employment and it has indeed decreased. At the moment it is at a very general level regarding quotas and negative and positive incentives. The principle should be clear: any law that is passed must increase the recruitment rate by a considerable amount, while maintaining that there will be no negative incentives to increase the employment of ultra-Orthodox society in the future."
There is sometimes populist criticism from politicians about the Bank of Israel.
Does it endanger his position in the world?
"There is criticism regarding the monetary policy and the interest rate and the like, and unfortunately it is often due to a lack of understanding of the need and the monetary policy to eradicate inflation, which if we do not eradicate it will seriously damage the economy, first and foremost the weak companies. This is the first point regarding this policy. In addition, there are all kinds of proposals Law, some of them are talking about entering into the considerations of the monetary committee against the subject of competition in the financial world. This is absolutely dangerous. Some are talking about providing credit against deposits of unsupervised entities, which is super dangerous."
"Regarding the issue of intervention in the monetary committee, it should be understood that the importance of the independence of institutions in the eyes of international bodies... This issue, the independence of the central bank, is critical, and as much as there is damage to it, it will be a fatal damage to the economy by the same factors that you asked me about. How Biden said DON'T. The Minister of Finance is here, and I am talking to investors. It is important to me that the Minister of Finance understands that any damage to this issue is damage to Israel's economy, especially in the eyes of the international bodies."
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