The Governor of the Bank of Israel used remarks at Israel’s National Energy Conference to outline the macroeconomic outlook amid the war, pointing to recent improvement after an initial setback and reiterating that inflation, still above target, is expected to moderate back into the target range in the second half of the year. The update highlighted ongoing excess demand pressures alongside supply constraints that are slowing the closing of the output gap back to trend. Inflation was described as being pushed up in part by tax increases, while the risk premium that rose during the war has recently eased, with market confidence framed as dependent on continuing responsible fiscal and monetary policies. The Governor also stressed the importance of approving the 2025 budget in its current form, noting that its composition includes significant adjustments that have supported market confidence, while adding that there remains scope to strengthen growth engines, alongside longer-term priorities such as productivity, education quality, and higher participation and employment across population groups. On questions about extending the Deputy Governor’s appointment, the Governor said the Prime Minister has historically recognised the importance of central bank independence and expressed hope that the Deputy Governor’s appointment would be approved this week.
Bank of Israel 2025-03-11
Bank of Israel Governor says inflation should return to target in the second half of the year and urges approval of the 2025 budget
The Governor of the Bank of Israel, at Israel’s National Energy Conference, outlined a macroeconomic outlook amid the war, noting inflation above target but expected to moderate by mid-year, with market confidence reliant on responsible fiscal and monetary policies. He emphasized the importance of approving the 2025 budget, which includes significant adjustments supporting market confidence, and expressed hope for the Deputy Governor’s appointment approval, highlighting central bank independence.