Bank of Israel Governor Amir Yaron “sabotaged Israel’s economy” by criticizing the government’s proposed judicial reform in an interview on CNN on March 14, Diaspora Affairs Minister and Social Equality Minister Amichai Chikli said Tuesday.
The criticism came a day after the BoI raised the national interest rate by 0.25%, up to 4.5%, the highest since December 2006 and marking the ninth increase in 12 months, during a long-fought effort to curb the country’s steepening inflation rate. Just last month, the bank raised the interest rate by 0.5%, bringing it up to a 15-year high of 4.25%.
“I am very sorry for the Bank of Israel governor’s conduct. When he went to a foreign outlet and gave doomsday predictions about Israel’s economy, he sabotaged it,” Chikli said in an interview on KAN radio. “Economics is more [about] psychology, when you come and say that there will be ‘darkness over the surface of the deep,’ you create an image of the future. The prediction that you say is the prediction that you create.”
Chikli said Yaron’s move was “more political than economic. He serves the elites and not the citizens of Israel.”
Minutes after the interview, Chikli put out a clarification, saying he was not referring to Monday’s interest rate hike and fully supported the Bank of Israel’s independence. Rather, he had referred explicitly only to Yaron’s CNN interview.
Likud MK Hanoch Milwidsky on Tuesday made similar comments.
“My stomach flips from the governor’s comments,” he said on Radio Jerusalem. “His actions raise the question of who exactly he answers to. When one sees his appearances lately in the media it is hard to agree that he is a neutral public worker and not promoting an agenda,” Milwidsky added.
Like Chikli, Milwidsky also walked back his comments later on Tuesday, saying on Channel 12 that he “supported the Bank of Israel governor in his fight against inflation and setting professional monetary policy,” but that he opposed “political comments pretending to be professional.”
Karhi also attacked Yaron
The comments came a day after Communications Minister Shlomo Karhi attacked Yaron on Twitter.
“Thank you to the Bank of Israel governor for the fabulous holiday gift he granted to the people of Israel,” Karhi wrote cynically. “With such obtuseness on Passover eve, maybe we should appoint a robot in the role of governor who will make decisions on interest hikes based on an objective algorithm that is disconnected from the people.
“And maybe it is time already to deal with opening the banking cartel to competition, and not just enable the banks to become rich from interest,” Karhi said.
Likud MK Danny Danon criticized his fellow party members.
“One should think twice before speaking about the governor,” he said.
Yaron spoke out strongly against judicial reform in the CNN interview on March 14, warning that it could lead to the loss of central bank independence.
“Right now, the changes in the judicial reform could weaken some of this independence,” he said. “Moreover, the process itself is hasty and does not have wide public agreement.”
Asked if he is worried about the possibility that investors will withdraw money and disinvest in Israel, Yaron answered in the affirmative, mentioning signs that this process may have already begun.
“We have seen some hi-tech leaders and industry leaders telling us that maybe investment firms won’t come in, and some of them are even talking [about how] they might take their business elsewhere in the long run,” he explained. “The implication might be basically brain drain, etc, and this is why it needs to be handled with care,” he said during the interview.
Regarding concerns of judicial reform eroding the independence of the central bank, Yaron stressed that the independence of the governor and the independence of the central bank are critical to the economy.
“Any country that has tinkered, let alone weakened, the independence of the central bank, has suffered dire economic consequences.”
However, he said that “I believe all our leaders and decision-makers ultimately understand this and therefore would not come close to touching the independence of the bank.”
Zachy Hennessey contributed to this report.