Netanyahu rejects request for gov't oversight on Bank of Israel interest rates

Prime Minister Benjamin Netanyahu has rejected a request from Foreign Minister Eli Cohen, who asked that the government take steps to prevent the further rise in Israel's interest rates.

In a tweet sent on Monday evening, the foreign minister requested that Finance Minister Bezalel Smotrich "draw up an outline with the Governor of the Bank of Israel to stop interest rate increases. Against the background of the moderation of inflation, there was no justification for raising the interest rate today."

In a follow-up tweet, he expanded further, addressing "all the naysayers who ignore the dire consequences of the interest rate hike," and saying: "Dialogue and agreement between the Treasury and the Bank of Israel are necessary. Forming a common outline will allow for the moderation of the sharp interest rate increases, which are not justified in view of the level of inflation in Israel."

Cohen blasted for "populist statement"

However, on Tuesday afternoon, Netanyahu addressed Cohen's statement via his own Twitter account and rebuffed the request that had been made.

"Under my leadership, the Bank of Israel law that guarantees the independence of the monetary committee headed by the governor in determining the interest rate was passed. Nothing will change it," he wrote.

Finance Minister Bezalel Smotrich also responded to Cohen's request, calling it a "populist statement" which threatened the Bank of Israel's independence.

"The independence of Israel’s central bank is fundamental for our strong and innovative economy," he wrote. "As a government, we will deliver a budget that invests heavily in infrastructure for economic growth as well as a package of assistance for those truly in need."

Marking a new three-year low, Israel's shekel dropped to just 1.9% against the dollar on Tuesday, the morning after the government's judicial reforms passed its first vote in Knesset.

The shekel stood at 3.645 per dollar in afternoon trading, its weakest level since April 2020 and down 5.5% this month. It also fell 1.5% versus the euro. Government bond prices were down as much as 2.1% and Tel Aviv share indices slipped 1.1%.

Reuters contributed to this report.