Remarks by Bank of Israel Deputy Governor Andrew Abir at a conference
The conference dealt with the issue of new trends in fiscal and monetary policy. Abir’s full remarks in English, and the presentation he made, are attached to this notice.
· The Israeli economy managed to get through the COVID-19 crisis quite impressively in comparison with other countries. This was thanks to the good economic conditions of the Israeli economy prior to the crisis, and the rapid growth of the Israeli high-tech sector.
· The renewing demand for products and services, as part of the global exit from the crisis, encountered a supply bottleneck, which led, in part, to an increase in inflation globally as well as in Israel. However, inflation in Israel was, and remains, significantly lower than in most OECD countries.
· With the publication of the most recent index readings in Israel, inflation increased to beyond the Bank of Israel’s target range. One-year inflation expectations from most sources are at the upper bound of the target range, and medium- and long-term inflation expectations are within the range.
· With the recovery from the crisis, central banks around the world began tapering the monetary accommodation they had put in place. The Bank of Israel essentially began monetary tapering still in 2021, with the gradual ending of the special accommodation programs it had operated during the crisis. In view of recent developments in inflation and the increase in expectations, the process of monetary tapering may be more rapid than we thought.
· The crisis in Ukraine makes the determination of monetary policy more complex, since it creates a supply-side shock. It may delay the return of inflation to the target range beyond what we had assessed prior to the start of the crisis.