As Israel’s interest rate rose to 4.5 percent on Monday – the country’s ninth consecutive interest rate hike in under a year – Communications Minister Shlomo Karhi called to replace the head of Israel’s central bank with a robot.
“Thanks to the governor of the Bank of Israel for the magnificent holiday gift he gave to the citizens of Israel,” Karhi tweeted after the bank announced a further 0.25 percent rise, driving up mortgage rates.
The Bank of Israel decided on the hike in an attempt to align Israel with the United States’ rate of interest rate increases. The Federal Reserve recently raised the interest rate there by 0.25 percentage points. The decision was part of the Bank of Israel’s fight against rapidly rising inflation, which has led to higher interest rates on loans and mortgages.
Last year, the bank’s governor Amir Yaron warned lawmakers not to interfere with monetary policy decisions.
“With such opaqueness, on the eve of Passover, perhaps it is possible to put a robot in the position of governor, who will make decisions on interest rate increases based on an objective algorithm, disconnected from the people,” Karhi quipped. “Maybe it’s worth dealing with opening up the banking cartel to competition, and not just letting the banks get rich from the interest.”
Karhi’s criticism of Yaron came just over a month after Prime Minister Benjamin Netanyahu was forced to publicly guarantee the independence of the country’s central bank, in response to Foreign Minister Eli Cohen’s demand that the government intervene to prevent further increases in the interest rate.
“Under my leadership, The Bank of Israel law that guarantees the independence of the monetary committee headed by the governor in determining the interest rate was passed,” he tweeted in English in late February, in what appeared to be a message to international markets. “Nothing will change it.”
His rejection of Cohen’s demand followed criticism by Finance Minister Bezalel Smotrich, who, also tweeting in English, had declared that “the independence of Israel’s central bank is fundamental for our strong and innovative economy” and that as finance minister, he stood “firmly against populist statements threatening the Bank of Israel’s independence.”
In January, Yaron also warned Prime Minister Benjamin Netanyahu that senior global economic figures had expressed concerns to him about the potential consequences of the government’s planned judicial overhaul, which has already caused what appears to be a movement by some companies to leave the Israeli market.
In November, Knesset Finance Committee chairman Moshe Gafni proposed to shield mortgages from rate increases. Yaron countered in a speech that “magic solutions” proposed to blunt the impact of interest rate hikes would hurt the weakest sectors of the economy.
“Countries where the political echelon compromised the independence of the central bank discovered that the trust of the markets and international institutions is earned through hard and strenuous work over decades, but it can be lost in the blink of an eye,” he stated.
Speaking with CNN last month, Yaron described the government’s attempts to reset the balance of power between the branches of government as being carried out in a “hasty” way and without wide public support, adding that “in the long-run, the implication might be basically brain-drain, and this is why this needs to be handled with care.”
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