Amidst the economic challenges posed by the ongoing conflict with Hamas and the resulting financial strain, a debate has erupted over the leadership of the Bank of Israel. Moshe Gafni, Chair of the Knesset Finance Committee and a member of the United Torah Judaism party, has taken a firm stand against the reappointment of Bank of Israel Governor Amir Yaron for a second term. Gafni criticizes Yaron's policies, particularly the interest rate hikes that have been in place since mid-2022, which he argues have disproportionately impacted low-income groups.
The central bank's decision to increase mortgage rates to 4.75% has been a point of contention for Gafni, who represents poorer demographics that are now facing the burden of raised loan rates. He argues that consumer bank interests have not seen similar increases and has expressed dissatisfaction with the central bank's reluctance to pressure banks into offering relief measures during these difficult times.
In response to Gafni's assertions, the Bank of Israel has defended its actions by highlighting its international recognition for maintaining economic stability in the face of rampant inflation, the aftermath of the pandemic, and military conflicts. The central bank has emphasized the importance of informed economic discussions and has warned against engaging in toxic discourse while managing crises.
Despite the criticisms, Prime Minister Benjamin Netanyahu has expressed support for Yaron's continuation in the role, pending cabinet approval. His stance is backed by economists who have praised Yaron's role as a stabilizing force during challenging times, including the conflicts with Hamas.
The Bank of Israel, which has been managing an inflation rate currently at 3.7%—above the target but showing improvement from previous highs—is not expected to change interest rates in today's central bank meeting scheduled at 1400 GMT. Nevertheless, there is anticipation that discussions on potential rate reductions might take place in the January session.
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