The interest rate increased by half a percent, and stands at a record of over four percent. The basic interest rate in Israel increased to 4.25% and the prime interest rate increased accordingly to 5.75%. Following the abnormal and higher than expected increase, Raul Sargo, the president of the ‘Boni Ha’aretz’ contractors’ association, spoke with Anat Davidov on radio 103FM, he commented on the matter and claimed: “It’s time for the governor to stop with this madness of raising interest rates.”
For the eighth time in a row: the interest rate has risen sharply again – and stands at 4.25%
On the rising inflation and the continuous interest rate hikes, Sargo claimed: “I don’t know any factor in the Israeli economy that likes the abnormal interest rate hike. Who said that the interest rate hike will lower inflation? We see that in the meantime, as the interest rate rises, inflation rises. It’s time for the academics and economists at the Bank of Israel to start thinking A bit outside the box, because inflation arises from reasons that are not the usual causes of inflation.
As an idea to deal with it, he explained that “First, it is possible to deal with the measures of the state. They have already talked about it, for example the financing or reduction of energy costs, of electricity, property tax and water. This creates a situation where our increases are not that high. The second thing, to improve the chains The supply that all products have. This inflation is also due to the energy crisis, maritime transport, all kinds of reasons that led to price increases all over the world, not only here. If, for example, there is no increase in public wages, there will be less pressure for the increase in inflation, definitely.”
“If they raise the salaries, it will go into a spiral, it will increase inflation,” Sargo added. “There are several ways to deal with this. For example, the interest rate differentials led to an increase in the dollar exchange rate, the Bank of Israel does not have to raise the interest rate, it can sell the remaining dollars and cause the shekel to strengthen. There is a whole range of measures. Of course, the interest rate increase is part of it, but my argument It’s not about the interest rate increase, it’s about its pace.”
As for the real estate market, Sargo said that “this situation is blessed, the fact that price increases are stopping, prices are starting to stabilize is a good, positive thing and I hope it will continue like this. It is true that this was not due to the government’s policy, especially the increase in interest rates, which drove home buyers away. And actually those buyers went over the fence, most of them rent apartments, the rise in interest rates causes the rent to rise. It is a good thing that is happening, that the prices are stabilizing, but where is the problem here? The rise in interest rates affects the supply side, and contractors today build less and less. The banks are also approving fewer and fewer projects. Construction starts in recent months have dropped by 20 percent.”
“It’s not good,” he explained, “because in a few months, when the apartment buyers will get used to a high interest rate environment, the interest rate will start to fall, an improvement in inflation or an improvement in the economic situation, all of these will fall off the fence. Obviously, there is a position of mine, of the contractors’ association, But this does not mean that when I speak from the position of contractors, it does not mean that it is not the right thing to do. I am disappointed that apartment prices have stopped, does that sound strange? No. Our interest is the same as the interest of the state, that there should be stabilization, because then land prices will not rise. , it’s in the interest of all of us.”
Governor of the Bank of Israel, Prof. Amir Yaron (Photo: College of Management)
“I don’t want to restrict the steps of the Bank of Israel, the Bank of Israel is old enough,” he added. “In my opinion, there is a lack of economic leadership by the governor, he does not look left and right. He only sees inflation. He does not look and see the effects of the social protest following the reform of the law on the economy. We are in a very sensitive situation right now, both in high-tech and in other places. This that Israel ended the year 2022 with six percent growth, wait, who caused the growth? Hi-tech and construction, these two industries are in crisis. To come and ignore all of this and raise the interest rate like there is no tomorrow and cause the destruction of businesses and fatal damage to mortgage lenders. Today the Governor is hurting the economy, it is time that he will stop with this madness of raising the interest rate.”
Assisted in the preparation of the article: Shani Romano 103fm