Smotrich Urges Bank of Israel to Cut Rates Sharply After Inflation Falls

Finance Minister Bezalel Smotrich on Tuesday called on Bank of Israel Governor Prof. Amir Yaron to lower interest rates “sharply and immediately,” following the latest consumer price index data. Smotrich said the improved inflation figures require a fast response from the central bank and repeated his view that rates should have been cut earlier.

“In economic data, the numbers speak for themselves when inflation is in a good and desirable place,” Smotrich wrote. “I repeat my call to the governor of the Bank of Israel to lower interest rates, and this time sharply. This step has been necessary for a long time, and I very much hope that the Bank of Israel will act to correct this.”

He also criticized the central bank for what he sees as a delay, saying a quicker response “could already have eased the burden on households and business owners, reduced the cost of mortgages and loans that we all pay, and accelerated growth in the economy.” His comments came after the Central Bureau of Statistics reported a 0.3% drop in the CPI in May. Over the past 12 months, the index has risen just 1.9%, comfortably within the government’s target range.

The statement also comes amid signs that Yaron may be open to an earlier rate cut before the scheduled decision in early July. At a recent economic conference, he said cumulative shekel appreciation could push inflation lower and that falling expectations may justify “more expansionary monetary policy at faster rates.” That language points to the possibility of an early rate cut, which could significantly affect the housing market and especially mortgage borrowing.