BoI governor criticizes “haste” of judicial reforms

In an interview with CNN’s Richard Quest yesterday evening, Governor of the Bank of Israel Amir Yaron stressed the importance of preserving the Bank of Israel’s independence, amid the legislation giving the government greater influence over Israel’s system of justice and calls by some coalition politicians for reducing the central bank’s control of monetary policy.

To Quest’s suggestion that, after the legal system, “perhaps you’re next”, Yaron responded that the independence of the Bank of Israel was “critical to the economy” and that countries in which the independence of the central bank had been impaired “suffered dire economic consequences.” He added that “all our leaders and decision makers ultimately understand this, and therefore will not come close to touching the independence of the bank.” He pointed out that the when the issue had arisen both the prime minister and the finance minister had immediately reaffirmed that the Bank of Israel was solely responsible for monetary policy. Yaron also gave credit to the government for having approved a responsible budget and for reaching a public sector wage agreement that he said was “not expansionary.”

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Asked about the economic impact of the changes in Israel’s legal system, Yaron criticized the process, which he said “is hasty and does not have wide agreement in the public.” Quest cited investors in Israel’s vital technology sector as saying “we will withdraw, we will disinvest.” Yaron responded: “We have had high tech leaders and industry leaders telling us that maybe at first investment won’t come in, and some of them are even talking that they might take their business elsewhere. In the long run the implication might be, basically, brain drain etcetera, and this is why this needs to be handled with care.”

On inflation and interest rates, Yaron said “We are determined, absolutely determined, to bring inflation back down to its target,” adding that higher interest rates were the main means of doing so. He said he thought that, because of the stickiness of inflation, interest rates would go higher globally and would remain high for some time. “If you stop too early, inflation can come back with a vengeance,” he said.

Published by Globes, Israel business news – en.globes.co.il – on March 15, 2023.

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