Bank of Israel Governor Expresses Concerns Over Coalition Spending, Defends Interest Rate Hike

The Governor of the Bank of Israel, Professor Amir Yaron, has voiced concerns regarding coalition spending in the Haredi sector. He suggested that the current budgetary allocations are unlikely to stimulate employment within this community, despite the growing weight of the Haredi society on the national economy, according to sources.

Yaron Urges Increased Employment Rates in Haredi Sector

Prof. Yaron argues that every Haredi child should have the opportunity for equitable choice and the option to enter the workforce. “The coalition funds in the current budget do not meet this principle [of increasing employment], and do not encourage Haredim to go to work,” he stated.

This issue isn’t a new revelation for Prof. Yaron, he identified this problem as early as 2019 and has since been advocating for a rise in Haredi working rates. Without a shift in demographic trends, he believes a tax increase of 16% would be necessary.

The Governor Defends Hike in Interest Rates and Shares Views on Property Taxes

Turning his attention to the recent hike in interest rates and the controversy over the proposed increase in the municipal tax fund, Prof. Yaron defended the decision to raise the interest rate to 4.75% this Monday. He said that without decisive action to increase the interest rate, inflation could have skyrocketed to double digits, damaging public trust in the shekel and leading to contracts being written in dollars instead.

Despite pushback and political pressure, Prof. Yaron stands firm in his decisions, stating he would not hesitate to raise interest rates further if required to keep inflation in check. “If we have to, we will continue to raise it,” he confirmed.

Additionally, the governor touched on the concept of the municipal tax fund, stating, “The main idea of the fund was to have strong authorities, where taxes for businesses are high and property tax costs for citizens are low.” However, he did express concerns that the proposed mechanism might not be effective and could lead to various distortions.

Lastly, Prof. Yaron pointed out signs of adaptation in the housing market with developers reportedly responding to lower land prices by increasing construction projects. He anticipates this shift to result in lower house prices for consumers, eventually impacting rental costs.

The governor has called on the housing minister to address house prices as a significant contributor to the cost of living crisis, emphasizing the government’s need to prioritize this issue.