Title: Bank of Israel Governor’s Future Uncertain as Decision Looms
Subtitle: Speculation arises regarding the potential replacement of Prof. Amir Yaron
Date: [Current Date]
In about a month, Prof. Amir Yaron, the governor of the Bank of Israel, is expected to announce whether he will seek another term as his current five-year tenure approaches its end in 2023. However, the governor’s decision may hinge on the intentions of Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich to retain him.
According to reports, the United States and Saudi Arabia have reached a series of agreements regarding normalization with Israel, resulting in a strengthening of the shekel. Meanwhile, there are concerns about rising wages outpacing inflation, which could potentially lead to increased inflation rates.
During a recent interview with Bloomberg, Prime Minister Netanyahu was asked about Prof. Yaron’s future to which he replied, “I want to think about it, I didn’t have time for that.” In July, Finance Minister Smotrich explicitly stated that the default option is to not extend the governor’s term.
Furthermore, the Minister of Finance emphasized that only two governors since 1971 have had their tenures extended, implying that he has already looked into the matter extensively. The significance of the Bank of Israel governor’s identity in the eyes of international investors has surprised top Israeli economic officials.
Within the prime minister’s circle, efforts have reportedly begun to identify potential candidates for the position, with a focus on individuals associated with foreign universities. Foreign investors have displayed great curiosity regarding the next governor of the Central Bank of Israel due to the uncertainty surrounding the Israeli economy and global economies over the past year.
An Israeli economist revealed that he believed Prime Minister Netanyahu would not appoint a “populist” governor, stressing the importance of the central bank’s independence. A failure to maintain the Bank of Israel’s status could harm the markets and the rating companies, which also closely monitor the governor’s identity.
If Prof. Yaron decides not to continue for another term, sources in the market and government ministries speculate that Prime Minister Netanyahu’s economic advisor, Prof. Avi Simhon, could play a significant role in selecting the next governor. Prof. Simhon has previously expressed disinterest in the position and has been credited with recommending Prof. Yaron’s appointment in 2018.
In the past, the appointment process for the governor’s position has been lengthy. In the previous term, Dr. Nadine Budo-Trachtenberg served as an interim governor due to procedural procedures. The appointment of Prof. Karnit Flug also faced challenges and required negotiations between the Minister of Finance at the time, Yair Lapid, and Prime Minister Netanyahu.
Prof. Yaron’s tenure has been marked by significant turmoil, particularly due to the outbreak of the COVID-19 pandemic. As the government’s economic advisor, he has not always aligned with and supported its actions, including the controversial “grant for every citizen” program. The recent resurgence of inflation has further complicated matters, as the Bank of Israel has raised interest rates in response to curb inflation.
This step faced criticism from the public and even senior government officials, resulting in discussions about reducing the independence of the Bank of Israel. The governor’s assertive response to these discussions has led many to believe that he may not seek a second term.
The Bank of Israel has announced that Prof. Yaron will make his decision during the Tishrei holiday period. While highlighting the governor’s leadership during unprecedented events such as the COVID-19 pandemic and multiple election systems, there remain challenges such as eradicating inflation that he would need to address if he decides to continue in his role.
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