Andrew Abir Deputy Governor of the Bank of Israel (Photo by the Bank of Israel)
The Deputy Governor of the Bank of Israel, Andrew Avir, today gives official approval to the assessments of anyone with eyes in his head and sees the acceleration in the rate of inflation to the point where it becomes a real threat to economic stability. Abir says at an online conference of the Alrov Institute for Real Estate Research at the Koller Faculty of Management at Tel Aviv University in collaboration with the Rutgers Center for Real Estate and The New Jersey-Israel Commission, that in light of inflation data the Bank of Israel will (probably) accelerate interest rates.
Abir said that the Israeli economy has been remarkably successful in the corona crisis compared to other countries. This is due to the good economic conditions that the Israeli economy had before the crisis and thanks to the rapidly growing Israeli high-tech sector. “Renewed demand for services and products, as part of the global exit from the crisis, met with the bottleneck of supply. This led, among other things, to rising inflation in the world and in Israel. Although inflation in Israel was and still is significantly lower than in most OECD countries.”
More in-
But the more important (but obvious) things were that “with the publication of the latest indices, inflation in Israel has risen above the Bank of Israel’s target range. Expectations for the coming year from most sources are at the upper end of the target and medium- and long-term expectations are within the target.
“With the recovery from the crisis, central banks around the world began to reduce the degree of monetary expansion they introduced. The Bank of Israel actually began a monetary contraction as early as 2021. Faster than we thought. ”
As for the economic implications of the war between Russia and Ukraine, Abir said that “the crisis in Ukraine adds complexity in determining monetary policy, as it creates a shock on the supply side. It may delay inflation from returning to the target beyond what we estimated before the crisis.”
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