Labor and Welfare Committee Chairman MK Israel Eichler on Sunday blasted the Governor of the Bank of Israel Amir Yaron for his repeated raising of interest rates which has zero impact on the country’s inflation, while middle- and lower-class families are being oppressed by their ballooning mortgage payments.
“Yeshiva students show me the interest rate on their mortgage and it’s horrible,” Eichler told Kikar Hashabbat. He said Governor Yaron “Raised the interest rates and didn’t stop the inflation – in my opinion, he must resign.”
The Bank of Israel is expected to announce on Monday another increase of the interest rate––the tenth in a row––by at least 0.25%, to 4.75%. UPDATE: The Bank of Israel raised the interest rate to 4.75% on Monday afternoon.
In its most recent announcement in April, the Bank of Israel estimated that the interest rate would reach 4.75% only at the end of 2023, but every single economic report believes the bank will reach this level already this week, following the Central Bureau of Statistics report last week of an annual inflation rate of 5%.
And the fact that this rate of inflation remains intact doesn’t seem to deter the bank governor, who may have been replaced by an unseeing, unfeeling bot.
יו”ר ועדת העבודה והרווחה ח”כ ישראל אייכלר:
“נגיד בנק ישראל העלה את הריבית ולא בלם את האינפלציה, הוא חייב להתפטר. הוא צריך לעמוד לדין”.
אחריות על הממשלה? “השלטון לא בידינו”.
(להקשיב עד הסוף). pic.twitter.com/w8ez22GFtC
— ישי כהן (@ishaycoen) May 22, 2023
I translated a portion of MK Eichler’s interview with Kikar Hashabbat’s Ishay Cohen (so you won’t have to). Here goes:
Eichler: Middle-class people are torn here. People come to me with their interest rates on their mortgage, it’s horrible.
Ishay: You understand why he keeps raising the interest rate?
Eichler: I know the result, which is that he raised the interest rates and didn’t stop inflation. In my opinion, he must resign. He failed with raising the interest rates whose sole purpose was to block inflation, and inflation was not blocked.
Ishay: You think the governor should not be independent, that the state should tell him, Mister, this is it for raising interest rates?
Eichler: He must be judged by the public for raising interest rates and not stopping inflation. Why should only elected officials face the public’s judgment? The bank governor decided to raise interest rates to stop inflation. We all know this. And today, we all know it didn’t help at all.”
This went on for a while.
On Monday morning, Ynet quoted Evyatar Pinto, 32, father of three, a typical Israeli who pays the monthly mortgage on his home:
“A year and two months ago, we purchased an apartment in the Har Huma neighborhood in Jerusalem, not a luxury neighborhood. The apartment is not some crazy villa either. A four-room garden apartment. The interest rate then was low, and the Bank of Israel even allowed us to increase the prime interest rate to two-thirds of the mortgage. I took advantage of this. To me, it looked like a signal from the Bank of Israel, that it was not going to raise the interest rate. We took a mortgage for 2.225 million shekels ($609,282).
“The monthly repayment was NIS 8,700 ($2,382). It’s high, but I figured we could suffer a little. But then it kept going up until last month it reached NIS 12,700 ($3,478). When the mortgage payment goes up like that, you start recalculating expenses and giving up things like classes and even food. You only buy what you need at the most basic level. We even thought about selling the apartment. Fortunately, last week I was approved to refinance our mortgage, but there is a fear that the interest rate will rise further.”
When the central bank leads an effort to bring down inflation, its goal is to benefit the average consumer who suffers from rising prices, especially for basic goods and services. The bank weighs that against the discomfort of mortgage holders.