Under new leadership, Bank of Israel leaves interest rate unchanged
A former professor of banking and finance at The Wharton School of the University of Pennsylvania in Philadelphia, Yaron started his term as governor only two weeks ago.
By EYTAN HALONUpdated: JANUARY 8, 2019 05:42Governor of the Bank of Israel Prof. Amir Yaron holds a press conference, January 7, 2019(photo credit: MARC ISRAEL SELLEM/THE JERUSALEM POST)
The Bank of Israel announced it would be leaving its interest rate unchanged at 0.25% on Monday following the first meeting of the Monetary Committee under the leadership of the new governor Prof. Amir Yaron.The committee announced that future interest rises would be both gradual and cautious, in order to ensure stabilization of the inflation environment according to the bank’s targets, with its research department predicting inflation of 1.3% over the next 12 months.The Bank of Israel surprised analysts in November – during the transition period between former governess Dr. Karnit Flug and Yaron – when it raised its benchmark interest rate from an all-time low of 0.1% to 0.25% after more than three-and-a-half years without change.“Over time, the policy set by the Monetary Committee will aim to ensure that inflation stabilizes within the midpoint of our target range, during which the committee will ensure that monetary policy supports continued fiscal growth with a good rate of economic activity,” Yaron said.The new governor cited a number of key risks that could potentially alter its expectations given global events since the interest rate hike, including the renewal of appreciation of the shekel and the adverse impact on real activity of global economic developments and financial markets.“To the extent that these risks materialize, the committee will be able to continue to conduct accommodative monetary policy for a more extended time, in a manner that will be consistent with achieving the policy goals,” Yaron said.Reiterating comments made by both Prime Minister Benjamin Netanyahu and Finance Minister Moshe Kahlon at his inauguration ceremony at the President’s Residence, Yaron emphasized that they share a clear understanding of the importance of an independent central bank and governor in monetary policy matters.His predecessor, Flug experienced a five-year term defined by economic stability but political friction, clashing several times with Kahlon over issues including business tax cuts, increasing the budget deficit and government housing policy.A former professor of banking and finance at The Wharton School of the University of Pennsylvania in Philadelphia, Yaron started his term as governor only two weeks ago.“I am obviously excited to enter into this position held by great Israeli economists, and I see it as a great honor,” he said.
