"Our forecast is based on the assumption that the interest rate will rise to around 4 percent"
: this is what the Deputy Governor of the Bank of Israel, Andrew Abir, said this morning (Monday) at the annual financial conference of the Chamber of Accountants regarding the economic forecast for 2023 and 2024.
"We expect that in the coming year there will be a certain slowdown in economic activity, but not that we will enter a recession," Abir noted.
"We may have to raise the interest rate even beyond 4 percent if inflation continues to rise, and demand does not decrease."
Bank of Israel, photo: Oren Ben Hakon
He also added that "the increase in inflation is not only a result of problems in the production chain and the rise in commodity prices. It is also a result of strong demand in an economy that recovered quickly from the corona lockdowns. When we came out of the corona period, the states gave a lot of money to citizens. Some people had more money in their current account after Corona than before, and the demand was very high and is still high."
The Deputy Governor referred to the fact that the banks were late in adjusting the interest rate on the deposits, but in addition to the criticism towards the banks, he pointed out that the public should be informed that there are other options besides the banks, and also that there should be negotiations with the banks on the amount of the deposits and to take advantage of the tools that the Bank of Israel has promoted for the benefit of the customers on this issue .
The housing market (illustration), photo: Oren Ben Hakon
Later in his speech, he also referred to the housing crisis: "The solution is not only to free up land, but also to improve and build infrastructure. Governments manage to start construction, to keep up with the growth of the population for one or two years, but they have to keep up with the construction of about 55 thousand housing units Every year over 10-15 years - this integrates and illustrates the importance of infrastructure planning."
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