Minister lashes Bank of Israel for rate hike, calls for deregulating lending industry

Communications Minister Shlomo Karhi has some harsh words for the Bank of Israel after it raises its benchmark interest rate, seemingly calling for an end to the practice of only letting banks borrow from Israel’s national reserve.

Karhi, a member of Likud, sarcastically thanks Bank of Israel governor Amir Yaron for “the holiday present for Israeli citizens,” presenting the economist as cold and detached from realities on the ground.

“With this kind of opacity on the eve of Passover, maybe we can just put a robot in the governor job, which will make decisions on raising interest rates using an objective algorithm, cut off from the people,” he tweets.

The Bank of Israel raised its benchmark lending rate to 4.50 percent Monday, hitting its highest rate since 2007, after a year that has seen the figure jump significantly to address inflationary pressures. The rate is 0.25% higher than previously, the most modest rise in a year, mirroring a similar decision to slow the rate hikes by the US Federal Reserve Bank.

The lending rate set by the Bank of Israel determines the interest rates banks pay the reserve to borrow money via a system currently only available to regulated and licensed banks. Consumers generally pay the BoI rate plus whatever extra the commercial bank adds on when borrowing.

But Karhi argues that the commercial banking sector, which he terms a “cartel,” should be deregulated, seemingly calling for it to be opened up to everybody, presumably including gray market lenders, payday loans and other types of activity criticized in the past for predatory practices.

“Not only banks should be allowed to get rich off interest,” he tweets.