BoI Governor: We hope for two rate cuts in second half

As expected, the Monetary Committee left the Bank of Israel to the interest rate unchanged at 4.5 %. In the decision, the Bank of Israel explained that there will be no price cuts until the second half of the year after it ran the consumer price index and decreased less than an annual rate of 3 %.

The Monetary Committee cited, “many risks to obtain a possible acceleration of inflation or not converging with the target scope: geopolitical developments and its impact on economic activity, long supply restrictions, Shekel, and financial developments.

After the decision, the governor of the Bank of Israel, Professor Amir Yaron, spoke to “Globes” about inflation and expectations to reduce prices and risks in the real estate market.

We see that this year's inflation expectations are moderate, and they will already be within the target range in July. Why not lower the interest rate before the second half of the year?

Yaron says, “First of all, as we said, there is a lot of uncertainty. This is just one expectations, and we really appreciate that if we see that geopolitical issues remain in the current environment, and that the excessive demand for the offer is truly moderate, we will see ourselves to enter the target scope in The second half.

“In the environment in which we are, there are many scenarios that can accelerate inflation. If this happens, we will have to have a more restricted interest rate environment over time. On the other hand, if we see that the operations are progressing at a faster pace, we will be able Also on behavior accordingly.

On contracting financing activities. Are you planning new restrictions?

“We are watching and analyzing developments in the real estate market on a continuous and close basis. We have emphasized the case for banks, and we are in a continuous dialogue with them about the need to manage accurate risks during this period.

“With regard to the issue of contractor loans and the need for banks to perform to conduct an updated and detailed evaluation of the risks in these issues, we are particularly concerned about the transactions where there is no complete completion of the borrower. Let's call it 20/80 The summaries seemed not sufficiently absorbed, so we have all the organizational tools ready to be used in this problem.

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What are the tools for example?

“I don't want to enter it at the present time. We are watching, we are in a dialogue, and we have directed banks. Banks have taken certain steps, and we will study, of course, whether this has been done enough.”

Assuming that the intense fighting in the war is behind us, what is the new focus of the Bank of Israel – growth or inflation?

“Inflation is 3.8 %. This is still a large extent. We realize that part of this is of course tax increases, but we also see operations in many places in the world – where inflation is relatively sticky. We also see data from the last quarter, which shows a request Locally high, which was already faced with an increase in imports.

“The interest rate restricts enough”

“So,” Yaron says, to what extent will this balance between demand and offer will reach? We expect that in the second half we will be in a place – we hope – the intensity of the war remains as it is IS. This process to the target scope, and on the other hand, it still allows the economy to continue recovery. “

It was published by Globes, Israel Business News – En.globes.co.il – on February 24, 2025.

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