JERUSALEM (Reuters) – Bank of Israel governor Amir Yaron said on Thursday that a series of government measures aimed at easing inflation and the cost of living were reasonable, but short-term interest rates could rise further. .
On Wednesday, Prime Minister Benjamin Netanyahu said Israel would cancel or cut recent increases in property taxes, water and energy costs, adding action was needed before the 2023 budget was approved in May. .
“The measures to mitigate the electricity, water and property tax hikes are reasonable given that these are temporary measures,” Yaron said at the conference.
“We must remember that the best way to deal with the cost of living is to promote structural reforms that promote competition in various markets.”
Yaron said he was encouraged by comments from Prime Minister Netanyahu and Finance Minister Bezalel Smotrich on promoting competition, opening markets and reducing excessive regulation.
Inflation in Israel hit a 2008 high of 5.3% in November, sending the overall cost of living skyrocketing and angering the public.
The Bank of Israel raised its benchmark interest rate (ILINR=ECI) from 0.1% in April to 3.75%, the highest level in more than 14 years, to bring inflation back to its official annual level. I coped with the cycle. Aim for 1-3%.
Interest rates, which were raised by half a percentage point last week, are expected to reach at least 4% in the next decision on Feb. 20.
“Inflation is likely to stay around 4% for the foreseeable future to ensure inflation returns to target,” Yaron said, citing the bank’s main scenario.
But if inflation picks up, interest rates could rise further, Yaron said.
Reporting by Stephen Scheer Editing by Bernadette Baum
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