Israeli Government Extends Bank of Israel Governor Amir Yaron's Term Amidst Economic Challenges

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by Ifi Reporter Category:Financial Nov 20, 2023

In a significant move to ensure stability in the face of economic challenges, Prime Minister Benjamin Netanyahu and Finance Minister Bezalel Smotrich have agreed to extend the term of Bank of Israel Governor Prof. Amir Yaron. The decision is set to be presented for government approval at its upcoming meeting.

The announcement follows a period of criticism directed at Prime Minister Netanyahu for the delay in making this crucial decision. Governor Yaron, who accepted the extension, expressed gratitude, stating, "I thank the Prime Minister and the Minister of Finance for the decision and the expression of trust in me and the Bank of Israel."

Prof. Amir Yaron, 59, will become the fourth governor among the ten governors of the Bank of Israel to serve beyond the standard five-year term. His predecessors, David Horowitz, Prof. Jacob Frankel, and Prof. Stanley Fischer, each had tenures extending beyond the customary period.

Finance Minister Bezalel Smotrich's support for the extension reflects a desire for stability in the current economic climate. Despite differences of opinion between the finance minister and Governor Yaron, Smotrich emphasized the need for continuity, especially during a time marked by a war, significant deficits, high unemployment, and widespread challenges for businesses and households.

Governor Yaron's term was set to conclude on December 23, prompting calls from senior officials and economists for an immediate announcement of the extension. Many argued that a temporary extension would weaken the governor's status, a crucial figure in navigating the economic crisis accompanying the ongoing conflict.

The Prime Minister's delay in extending Governor Yaron's term had been attributed to dissatisfaction with the governor's stance on the economic impact of legal reform legislation. However, amidst the outbreak of the war, concerns about potential negative implications for the Israeli economy led to a reconsideration, with various individuals, including Finance Minister Smotrich, advocating for the extension.

Throughout his five-year tenure, Governor Yaron earned praise for his proactive approach to unforeseen events. Notable actions include swiftly reducing interest rates in response to the onset of the COVID-19 pandemic and ensuring banks provided relief to war-affected individuals during the "Iron Swords" conflict.

In light of inflation concerns, Governor Yaron also received international recognition for timely interest rate adjustments, preventing inflation rates from soaring to the levels observed in other developed countries. In recent months, he has halted interest rate hikes to ease the economy, despite inflation rates remaining higher than desired.

Minister Benny Gantz welcomed the decision, stating, "I welcome the decision of the Prime Minister and the Minister of Finance to extend the term of office of the Governor of the Bank of Israel for a full term. This is an important decision for the stability of the economy and the right decision for the State of Israel."

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