Smotrich threatens BoI governor over interest rates

Is the scent of elections in the air? Minister of Finance Bezalel Smotrich criticized Governor of the Bank of Israel Amir Yaron today, saying, “He should have cut interest rates long ago. If he doesn’t do so, I’ll cut taxes.” Smotrich was addressing a meeting of senior Ministry of Finance officials with the Presidium of the Business Sector, headed by Dubi Amitai.

“I said six months ago that the governor should cut interest rates. There’s nothing clever about being conservative,” Smotrich added.

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Apparently because he understood that such remarks would be interpreted as damaging to the Bank of Israel’s independence in monetary policy, just when the international credit rating agencies are reviewing Israel’s rating, Smotrich hedged by saying, “The independence of the governor of the Bank of Israel is critical and his authority must not be undermined, but the governor is responsible for monetary policy, and I am responsible for fiscal policy.”

Amitai cast doubt on the government’s ability to pass a budget for 2026. Next year’s budget is still stuck at the initial stages and is caught up in political wrangling. For his part, Smotrich pledged at the meeting that he would be able to pass it.

Commenting on the plans for the forthcoming budget relating to market interest rates, in the shape of the reform to grant small bank licenses to non-bank entities, Smotrich said, “You are familiar with the reform we’re introducing on deposits. It’s dramatic for you in the business sector as well.

“I hope that we’ll succeed in making people used to freeing themselves from the clutches of the banks and to looking for alternatives, but both you as businesses, and households, will have much greater access. The quantity of credit will grow, the cost of credit will fall, and the result will be lower prices.”

The Bank of Israel stated in response, “The governor and the Bank of Israel make decisions exclusively on the basis of professional criteria. High inflation first and foremost hurts the weakest socioeconomic groups, and restraining it is a necessary condition for a properly functioning economy. Fiscal responsibility, especially at this time, is the order of the day.”

Published by Globes, Israel business news – en.globes.co.il – on September 4, 2025.

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