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Bank of Israel Governor: Rate will exceed our forecast

Several hours after raising the interest rate by 0.5% to 3.25%, Bank of Israel Governor Prof. Amir Yaron told Israel’s TV news channels that he expected future rate hikes to push the interest rate above the most recent forecast by the Bank of Israel research department of 3.5% in the third quarter of 2023.

Most analysts see the Bank of Israel Monetary Committee hiking the rate by 0.25% in each of its meetings in January and February 2023 to 3.75%.

Prof. Yaron explained the reasoning behind the Monetary Committee’s latest hike. “We raised it by 0.5% and not 0.75% because we know that the interest rate takes time to have an effect. This is a process and so we are undertaking it with the right size measures.”

He stressed that further hikes can be expected in the coming months. “This is most likely not the end of the process, the danger of inflation has not abated. At the same time, the economy is strong and employment is strong. We will probably exceed the research division’s forecast of an interest level of 3.5%. We expect the interest rate to continue to climb.”

Prof. Yaron added, more optimistically, “We do see inflation moderating in the first quarter of 2023 and stabilizing towards the summer.”

On the sharp rise in mortgage payments, which are hitting Israelis hard, Prof. Yaron said, “I understand the harm to the public, I understand that it costs more. On the other hand, inflation mainly hurts the weaker sectors of society, so we are determined to eradicate it as soon as possible, it will be for their benefit in the end.”

Finally, he reprimanded the banks for not updating interest rates on deposits, which has been the subject of public criticism. “I am also not satisfied with the interest rate on deposits. I would like it to go up even more, but we are in a country where the markets are free and this has great value too. We cannot take steps to intervene in this market.”

Published by Globes, Israel business news – en.globes.co.il – on November 22, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

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