"I believe that after five years of price stability we will be able to reach a real interest level similar to the rest of the Western world. We already have two such years behind us, so we only have three to go if nothing goes wrong along the way," Bank of Israel Governor David Klein told TheMarker.
Klein noted that short-term nominal interest is now lower than ever. He stated that the real interest rate is now 4.5-4.8% for the medium- and long-terms, which is close to the equilibrium point for long term interest.
Klein said that most of the work for lowering inflation has been completed in the technical sense, so we really have no further to go. "That doesn't mean we are turning out the lights and going home," Klein noted.
He said there are still other matters to handle, traditions handed down to us from the inflation ages, like public sector salaries, the problem of taxing bonds, or even the problem that rent prices are still quoted in dollar terms. Klein said that the market is dismantling some of these traditions itself, but some will demand hard work.