Israeli Prime Minister Benjamin Netanyahu has issued his strongest rebuke yet of lawmakers from his Likud party questioning central bank policy, saying they must “stop interfering” as political stress increasingly filters through to local markets.
(Bloomberg) —
Israeli Prime Minister Benjamin Netanyahu has issued his strongest rebuke yet of lawmakers from his Likud party questioning central bank policy, saying they must “stop interfering” as political stress increasingly filters through to local markets.
“We are committed to protecting the independence of the Bank of Israel,” Netanyahu said, according to a text message from the Likud. “Its independence has been a mainstay of the prime minister’s economic policy for two decades and nothing will change that.”
The declaration was the most emphatic yet by Netanyahu, in a culmination of a standoff over the central bank that began on Monday after a bigger-than-forecast hike in interest rates.
Hours after the decision, Foreign Minister Eli Cohen — one of the most prominent Likud politicians — slammed the run of monetary tightening and called on the government to intervene. Cohen later walked back the comments.
With Netanyahu speaking out in defense of the central bank, the shekel erased most of its losses after sliding by as much as 1.3% earlier on Wednesday. It’s been trading around the weakest in almost three years.
Finance Minister Bezalel Smotrich also criticized Cohen’s “populist statements.” In a tweet on Wednesday, Cohen said his earlier remarks had been “distorted” and that he supported the central bank’s independence.
Analysts and the Bank of Israel’s deputy governor have said political turmoil may be affecting the exchange rate, especially with tensions high over a judicial overhaul pursued by Netanyahu’s government.
Traders are bracing for more volatility in the shekel, with a measure of expected price swings jumping to the highest since the March 2020 pandemic rout.
A deep political divide has opened up in Israel because of the government-led initiative to reduce the authority of the legal system.
Tens of thousands of Israelis have been demonstrating against the change, which protesters warn could undermine the country’s democracy. Proponents argue the overhaul is needed to balance a legal system they say is biased.
–With assistance from Netty Ismail.
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