Shas MK Yinon Azoulay on Monday seemed to accuse Bank of Israel governor Amir Yaron of trying to weaken the shekel, in the latest attack on the senior finance official by a coalition lawmaker.
Last week, Yaron penned a letter to Prime Minister Benjamin Netanyahu, warning him against advancing legislation sponsored by Azoulay to give politicians say over borrowing rates. The bill, which would allow the finance minister to have a hand in setting consumer banking interest rates, would constitute a “very serious blow” to the independence of the central bank, he argued.
The letter sent stocks on the Tel Aviv exchange into a temporary swan dive; the shekel lost about one percent of its value in the immediate aftermath, and the coalition froze Azoulay’s bill hours before it was supposed to come up for a preliminary reading last week.
During a Monday meeting of the Knesset Finance Committee, Azoulay suggested that the bank governor had ulterior motives in sending the letter.
“I don’t want to say that maybe he had an interest in weakening the shekel a little,” Azoulay said.
Shas MK Yinon Azoulay speaks during a Knesset House Committee debate, January 17, 2023. (Olivier Fitoussi/ Flash90)
Yaron, who has strongly denounced government proposals that would harm the central bank’s independence, warned that Azoulay’s bill would infringe on the central bank’s ability to conduct monetary policy, as it would give the finance minister the authority to influence the interest rate.
Azoulay claimed Monday that he had met with Yaron prior to the letter’s publication and assured him that the clause giving the finance minister authority over the setting of interest rates would be removed later on in the legislative process. The Shas MK did not explain why it could not be removed ahead of a preliminary vote, which was supposed to take place last week.
“I told him that if we pass the bill together, [we can do it as you like]. But what did [Yaron] do? He went to the prime minister. Then suddenly the dollar jumped by a percentage point,” Azoulay lamented.
“Why did you have to rush to send a letter? [The bill] was only going to be approved through a preliminary reading,” he added.
Speaking after Azoulay during the parliamentary committee meeting, Finance Minister Bezalel Smotrich tried to strike a middle ground, urging Knesset members to push for reforms to monetary policy while avoiding “populist” measures “that may do more harm than good.”
Israeli banks have in recent months come under fire for not passing higher returns from raised interest rates to deposit holders, while fully profiting from the fruits of high rates on loans and mortgages.
View of the Bank of Israel main offices in Jerusalem, on March 31, 2019. (Yonatan Sindel/Flash90)
The interest rate that banks charge Israelis who take out household loans averages around 10%, while rates on deposits average between 2% and 4.5% depending on size and duration.
The discrepancy, which has been fueling the banks’ hefty profits, has led to outrage among the general public. Some politicians in recent months have accused Yaron of causing damage to the economy.
Yaron has also been attacked by some members of Netanyahu’s hardline coalition for warning of the negative impact of the judicial overhaul on the nation’s finances.
Last month, Heritage Minister Amichai Eliyahu called Yaron a “savage” and said he was causing damage to the State of Israel and should be fired, in comments panned by Netanyahu.
The premier, who appointed Yaron, is a free market advocate whose fiscal policies often bump up against ultra-Orthodox politicians, who have generally preferred increased social benefits and strong regulations protecting consumers.
In his comments to the Kol Barama station, Eliyahu said Yaron would have been axed had the government already passed its controversial judicial overhaul.
In May, United Torah Judaism MK Yisrael Eichler said Yaron should quit, following repeated interest rate hikes that have not quelled inflation, claiming that government power was in the hands of unelected bureaucrats.
In April, Communications Minister Shlomo Karhi said the Bank of Israel chief should be replaced with a robot, accusing Yaron of automatically raising rates instead of pausing to see how the hikes affect inflation.
Foreign Minister Eli Cohen and MK David Bitan, both members of Likud, also slammed the bank in February, with Cohen going as far as urging government intervention.
