In an interview with CNN’s Richard Quest last night, Bank of Israel Governor Amir Yaron stressed the importance of preserving the independence of the Bank of Israel, amid legislation giving the government a greater influence over the Israeli judiciary and calls from some coalition politicians to reduce control of monetary policy by the central bank.
To Quest’s suggestion that, after the justice system, “maybe you’re next,” Yaron replied that the Bank of Israel’s independence was “economically critical” and that the countries in which central bank independence had been compromised “suffered dire economic consequences.” He added that “all of our leaders and policy makers ultimately understand this, and therefore will not come close to touching on the independence of the bank He pointed out that when the question arose, the prime minister and finance minister immediately reaffirmed that the Bank of Israel was solely responsible for monetary policy. Yaron also paid tribute to the government for approving a responsible budget and for reaching a public sector pay deal which he said was “not expansionary”.
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Asked about the economic impact of changes to Israel’s legal system, Yaron criticized the process, which he said “is hasty and does not garner widespread public acceptance.” Quest quoted investors in Israel’s vital tech sector as saying “we’ll pull out, we’ll divest.” Yaron replied, “We’ve had tech executives and industry leaders tell us that maybe at first the investments won’t come in, and some of them are even saying that they could take their business elsewhere. In the long term, the implication could be, fundamentally, brain drain, etc., and that’s why it has to be managed carefully.”
On inflation and interest rates, Yaron said, “We are determined, absolutely determined, to bring inflation back to its target,” adding that higher interest rates were the main way to get there. . He said he believed that due to the stickiness of inflation, interest rates would rise globally and remain high for some time. “If you stop too soon, inflation can come back with a vengeance,” he said.
Published by Globes, Israel business news – en.globes.co.il – March 15, 2023.
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