Bank of Israel Governor Warns of Interest Rate Hikes, Criticizes Judicial Overhaul

Bank of Israel Governor Amir Yaron has said in an interview Tuesday with CNN that interest rate hikes would likely continue as inflation remains too high. Yaron mentioned that inflation has shown “stickiness” in Israel and globally, particularly in services. He expressed that the bank was determined to bring inflation back down to its annual target of 1-3% and will continue to raise rates to do so.

Israel’s inflation rate peaked at 5.4% in January 2022, which is the highest it has been since 2008. The February data is expected to be released on Wednesday. Reuters reported that economists it polled have estimated the rate to be 5%.

Over the past year, the Bank of Israel has raised its benchmark interest rate (called the Israeli shekel interbank offered rate – effective consumer interest, abbreviated ILINR=ECI) from 0.1% to 4.25% to control inflation.

Apart from discussing the economy, Yaron also criticized the Israeli government’s proposals to overhaul the judiciary, saying that the plan could weaken the courts’ independence. “The process itself is hasty and does not have a wide agreement in the public,” he said.