Bank of Israel Governor Amir Yaron met with Prime Minister Benjamin Netanyahu on Sunday and discussed whether Yaron would consider a second term, the central bank said, with both sides agreeing to decide after the Jewish high holidays next month. Yaron, whose five-year term ends in December, also urged the prime minister to seek a broad public consensus of the government’s plan to reform Israel’s judiciary, to preserve the country’s strong economy.
The central bank declined to comment when asked whether Netanyahu had asked Yaron to stay for a second term. Netanyahu’s office also did not comment.
Yaron Faced Multiple Challenges as Governor
Yaron, an Israeli-born U.S. finance professor, who was nominated by Netanyahu in 2018, has been critical of the economic impact of a plan by Netanyahu’s government to limit the powers of the Supreme Court. The issue of whether Yaron will seek, or be reappointed for a second term, has loomed over financial markets for months.
“Whoever is the governor has to continue to be independent and to express the professional opinion in matters concerning the Israeli economy,” Yaron said in an interview with Reuters last week. “And that such a position provides confidence to the markets.”
Yaron said the last five years have been “one of the most challenging” for any Israeli central banker, citing five election cycles, the COVID-19 pandemic, the Ukraine-Russia war, inflation and the government’s plan to overhaul the judiciary that has sparked mass protests and polarised the Israeli public.
Yaron Raised Interest Rates to Tame Inflation
Policymakers last week held the benchmark interest rate at 4.75% for a second straight time after having raised 10 times from 0.1% since April 2022 to tame inflation. Yaron fought off criticism and potential legislation from lawmakers over steep rate increases that have boosted bank profits and harmed mortgage holders, while banks were slow to pass on higher rates to savings accounts.
The Bank of Israel expects inflation to average 3.8% this year and 2.4% next year, within its 1-3% target range. It also forecasts economic growth of 6.3% this year and 4.5% next year, after a contraction of 2.5% in 2022 due to the pandemic.
Yaron Praised Israel’s Fiscal Policy and Vaccination Campaign
Yaron praised Israel’s fiscal policy and vaccination campaign, which have helped the country recover from the pandemic faster than most other countries. He said Israel’s fiscal deficit, which reached 11.6% of GDP in 2022, is expected to decline to 7.5% this year and 4% next year.
He also said Israel’s vaccination campaign, which has covered over 80% of its eligible population, has reduced hospitalisations and deaths from COVID-19 and allowed most economic activities to resume. He said Israel should continue to boost its vaccine supply and encourage more people to get vaccinated.
Yaron Called for Judicial Reform Consensus
Yaron called for a judicial reform consensus that would respect the independence and authority of the Supreme Court, which he said is essential for Israel’s democracy and economic stability. He said the government’s plan to limit the court’s power to overturn laws and appoint judges could undermine public trust and confidence in the legal system and create uncertainty for investors and businesses.
He said he hopes that Netanyahu and his coalition partners will engage in a constructive dialogue with the opposition, civil society and legal experts to find a balanced solution that would address the concerns of all sides.
