ISRAEL AT WAR - DAY 147

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Top Haredi MK slams extension of central bank head’s term, saying he ‘hurt the weak’

After Moshe Gafni calls Amir Yaron a ‘bad governor,’ Bank of Israel urges the Knesset Finance Committee chairman to become ‘knowledgeable about the basics of the economy’

Sharon Wrobel is a tech reporter for The Times of Israel.

Knesset Finance Committee chair MK Moshe Gafni during a committee meeting at the Knesset, in Jerusalem, on September 26, 2023. (Chaim Goldberg/Flash90)
Knesset Finance Committee chair MK Moshe Gafni during a committee meeting at the Knesset, in Jerusalem, on September 26, 2023. (Chaim Goldberg/Flash90)

United Torah Judaism MK Moshe Gafni on Monday lambasted the government’s decision to extend Bank of Israel Governor Amir Yaron’s tenure for a second term, calling it a “bad decision.”

Gafni, who chairs the Knesset Finance Committee, harshly criticized Yaron’s tenure for “hurting the weak,” being characterized by continuous interest rate hikes,” and putting a “terrible” burden on the public.

“He is not a good governor; he is a bad governor. The government is making a bad decision,” Gafni said.

“The banks’ earnings are skyrocketing, and where does the banks’ money come from? From the young couples who take out mortgages, and I will do what is necessary to act on this matter.”

Gafni’s attack comes after Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich last week agreed to extend Yaron’s tenure, which ends on Dec. 23, for another full five-year term, following months of speculation.

To bring down rising inflation, the Bank of Israel has over the past 19 months steadily hiked interest rates from a record low of 0.1% in April 2022 to 4.75% in July this year, though it has since paused the increases, which pushed up borrowing costs. The high interest burden had already been taking a toll on households and mortgage holders even before the outbreak of the war. The Bank of Israel is expected to keep interest rates steady for another month in a decision to be announced on Monday afternoon.

Bank of Israel Governor Amir Yaron speaks during a press conference in Jerusalem, on April 11, 2022. (Flash90)

In reaction to Gafni’s outburst, the Bank of Israel issued a response chiding the lawmaker.

“The interest rate hikes have prevented the Israeli economy from sliding into soaring inflation that primarily affects the weaker sections of the population,” the central bank said in a statement. “Without them, inflation would have struck deep roots, and many families, along with many businesses, would have been damaged even more over the course of time.”

The Bank of Israel called on Gafni, as the chairman of the Finance Committee, to see the “good of the entire economy, to be knowledgeable about the basics of the economy and also what is happening outside of Israel.”

“Then he would discover that the actions and steps taken by the Bank of Israel and the governor in dealing with inflation, the coronavirus and the war are being praised by all international professionals,” the central bank said.

Leading economists, including former senior Bank of Israel and Finance Ministry officials, as well as financial market participants, who consider Yaron as a stabilizing figure, have in recent weeks been pressing the government to extend his term — even more so in view of the challenging war period.

“It is equally important that the dialogue between the Knesset and the government, and public institutions such as the Bank of Israel, is professional and respectful, and is not led by toxic and divisive discourse, which is inappropriate, certainly at this time,” the Bank of Israel added.

This is not the first time that Gafni has criticized the Bank of Israel’s monetary policy. After the outbreak of the war, Gafni urged Yaron to cut interest rates to help ease the burden on individuals and businesses impacted by the fighting with the Hamas terror group.

At the end of last year, Gafni proposed a private bill to freeze mortgage rates as borrowing costs kept going up.

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