The Bank of Israel, the country’s central bank, has expressed concerns over the potential for looser fiscal policy to derail the current easing of inflation. The bank’s Governor, Amir Yaron, has indicated that the central bank is keeping a close eye on government spending, particularly the impact that an increase in government borrowing could have on the economy.
The Bank of Israel is worried that an increase in government spending could lead to higher inflation, which could then put a brake on the current decline in inflation that the country has been experiencing. This is a common concern among central banks, as a sudden increase in spending can lead to a surge in prices, which can then become entrenched in the economy and exacerbate existing inflationary pressures.
The Bank of Israel’s concerns come at a time when the country’s economy is slowly recovering from the financial crisis of 2008. The Bank has implemented a number of measures in order to stimulate the economy, including cutting interest rates and buying government bonds. These measures have been successful in boosting the economy, but have also had the effect of putting downward pressure on inflation.
The Bank of Israel is now worried that if the government begins to increase spending, this could lead to an increase in prices, which could undo the progress that the Bank has made in reducing inflation. This is why the Bank has been taking a cautious approach to fiscal policy, and is keeping a close eye on government spending.
In addition to its concerns over fiscal policy, the Bank of Israel is also worried about the potential for the global economy to be adversely impacted by the coronavirus pandemic. This is a concern shared by many central banks around the world, as the virus has had a severe impact on global economies, leading to a sharp decline in economic activity.
The Bank of Israel’s concerns over looser fiscal policy and the potential impact of the virus on the global economy are understandable, and it is clear that the Bank is taking a careful and measured approach to policy. It is important that the Bank is vigilant in watching for any potential increase in inflation, as it could quickly lead to higher prices and put a brake on the current easing of inflation.