00:00I want to just start with your impression so far of this Davos. I know you've come
00:02for many years. How has this one different? Well, first of all, naturally, everyone is
00:07waiting to see what President Trump will say today. In general, geopolitics are immense.
00:15Europe, energy, Middle East. So there's a lot of developments that are very important
00:22and are more than just the normal economics than we often are focused on.
00:29And I'll ask you extensively about your opinion on Greenland and your outpost there. No, I will not
00:33do that, but I will ask you about rate cuts. And you have cut rates twice since November. It was the
00:37first rate cut in about two years. There was a better outlook for the Israeli economy. Is this
00:44the beginning of a path of gradual lowering of rates as the economy does continue to strengthen and as
00:50the shekel also strengthens? So, Lisa, first of all, I want to say the Israeli people and the Israeli
00:57economy have shown great resiliency given the two years of war and the horrific day of the 7th of
01:04October. We are seeing people buying credit cards. VC money is back and is at high numbers.
01:13The shekel has strengthened. We are seeing the CDS of Israel government has come down back to pre-war
01:20level. And that's basically all demonstrating that we are in a better geopolitical situation than we
01:28were. But since the ceasefire, we've seen three major developments that have led us to the rate cuts,
01:37and in particular, the last rate cut. One, we've seen inflation environment moderated,
01:43not just realized inflation, but also expected inflation. Second, we've seen the shekel continue
01:50to strengthen, which provides a tailwind for more inflation moderation. And third, very important,
01:57I've talked to you in the past about the balance between demand and supply shortages of workers in
02:03Israel. We've seen that being moderated since the ceasefire. Reservists are coming back. We are seeing
02:11more participation in the labor force, and we're seeing some moderation in wage pressure. All these
02:17together have tipped the balance into the last rate cut. And in terms of your questions, we'll continue
02:25to do it based on what we've said all along, the developments in inflation and economic activity
02:31and in geopolitical uncertainty. Going to try to do it in as gradual as the developments happen. And we are
02:42seeing an interest rate a year out at about three and a half because we think we are not very far from
02:48neutral. So that's our assessment as of now with a growth rate for next year at 5%. This is assuming the
02:58ceasefire continues. Does the Board of Peace, as proposed by President Trump and adopted by the
03:04United Nations Council, help foster that security that the ceasefire would potentially remain?
03:12So, you know, I'm going to speak from an economic perspective. I hope that the mechanism that this
03:20brings about, and it's got a lot of members that have stakes in this issue bring about some of the
03:28constraints that are related to this. If Israel needs, first and foremost, continued security that
03:35will facilitate ceasefire, hopefully it also brings about the mechanism to enhance rehabilitation in Gaza,
03:44hopefully bringing prosperity and security there. If those two things happen, then obviously the Israeli
03:51economy will continue to do well. Gaza will improve. And I think it will also unlock levers for
04:00farther regional arrangements. And if those happen, I think we will see much bigger growth, not just for
04:08Israel, but for the region at large. And this really goes to a key question, which is that Israel has lost
04:12some clout in the international sphere. And you've seen this with the Gaza war really becoming a
04:18political hot potato in a lot of different places. What do you think it'll take to get the reputation
04:23back to a place where travel can come back or business can keep flooding in and really maintain the
04:27economy? So you're right. One cannot deny that we've seen sentiment being negative in some circles.
04:35Having said that, we've observed, as I mentioned, improvements in high-tech investments in Israel's
04:44risk premia, obviously purchases of our defense, you know, equipment. So all that is good. But I think
04:54to the extent that sustainable ceasefire and farther more, you know, basically sustainable regional
05:03arrangements are developed, I believe that negative sentiment will dissipate over time.
05:10You are the central banker to Israel. You have an increasingly international presence as well. You
05:15talk at a lot of conferences. You're very involved in research around the world. How focused are you
05:20on what's happening with Federal Reserve Chair Jerome Powell and some of the questions around the
05:26intellectual freedom around the Federal Reserve, the political independence of the Federal Reserve? How
05:30closely are you watching things like the hearing today with Lisa Cook and beyond?
05:35I won't get into the detail of the Feds even. Of course, I hold Chairman Powell and the Fed with very
05:43high respect. I want to say you've heard me in the past speaking about the importance of maintaining
05:52the strength and independent of institution. I've said it in the context when the judicial changes in
05:58Israel started in 2023. And obviously central banking is an important institution and central bank
06:06independence is kind of the pillar to facilitate its operation towards price stability, which ultimately
06:15facilitate growth and prosperity of the economy. So I think these elements are very, very important.
06:23And I think all central banks look at the developments in a way that we want to see central bank
06:31independence continue because we believe that's a pillar for delivering price stability, which we think
06:39ultimately, even though sometimes there are short run tradeoffs, perhaps that's ultimately the right way
06:45to deliver prosperity to the economy. Do you think that the independence is more in question today
06:49of some of these institutions than they have been in the past? I think obviously we're seeing a lot of
06:55things in the news in in in in in not just in the in in the US, but I think, you know, ultimately
07:04it'll come down to us central banks delivering the goods of maintaining price stability, even when the
07:15environment is, let's say, more challenging. In general, do you leave this meeting more optimistic or more
07:21pessimistic? I think there's a lot of uncertainty about various developments. But I think there's also
07:29a lot of avenues for hope for better outcomes economically, not just for Israel, but around the world in many ways.
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