mitigate and even neutralize interest rate risks. in many economies around the world, there are two common types of financial products based on benchmark interest rates : ( 1 ) deposits, loans, and mobile nominal interest bonds to various periods ; and ( 2 ) interest rate derivatives. in israel, unlike many other advanced economies, activity is currently conducted mainly in the assets themselves, and not through derivatives. it is important to note that even though activity in interest rate derivatives has grown significantly in recent years, it is still quite low compared to other countries, mainly in the longer terms. these differences indicate the underuse of financial defenses against interest rate risks in israel, relative to what is common in other advanced economies. in order to illustrate how the development of this type of instrument would help the broad public, we can use the example of the early payment fee that is well - known to the representatives of the banking system who are here, and that is relevant to almost anyone who takes out a mortgage in israel. it is reasonable to assume that if the banks were able to hedge the risk of early repayment of such a long - term loan and better manage their risk balance, this fee would be reduced. the banks would be able to do this by adopting a long - term irs instrument, which replaces cash flow from fixed interest with variable interest. as a result, the customer would have a greater ability to refinance a mortgage in view of various developments — whether they are specific to that customer or they apply to the entire economy — and would improve his financial state, or what we economists refer to as “ consumer well - being ". in contrast with most advanced economies, where a significant proportion of interest rate derivative transactions are settled through a central clearinghouse, such infrastructure still does not exist in israel. in a central clearinghouse, the risks of various transactions offset each other, and the remainder is transferred to one central entity that manages it through the appropriate collaterals. in order to develop the interest rate derivatives market in israel, it is important to advance a central clearinghouse that will significantly mitigate the credit risks inherent in such transactions. there are other advisable measures that it is worth thinking about, which i will discuss at other occasions. to conclude, the israeli economy has made many steps in recent years to advance competition in the credit market. there are additional possible stems that would complete what is necessary to advance competition in this market, some of which — particularly those that deal with the structure of

goals. these pressures notwithstanding, the ministry of finance is adhering to the correct and prudent policy without yielding to demands for unproductive hyperactive steps. b ) continuation of the bank of israel's interest policy, aimed essentially at maintaining price stability. in this respect there has not been, there is not, and there will not be any change in the bank's view of the maintenance of price stability as its major objective. at the same time, the bank will continue to contribute to the government's other economic goals, especially growth and employment, as long as doing so does not adversely impact on the objective of price stability. the bank will also continue to support financial stability. this issue, the bank of israel ’ s objectives, leads me to the bank ’ s role in the economy. the perception of the bank of israel's policy objectives is expressed in the modern approach to central banking, according to which the central bank is an independent institution, with clear division of labor and responsibility between the government, and especially the ministry of finance, on the one hand, and the central bank on the other. the independence of the central bank is vital for the success of the economy. this is because of the irresistible temptation for governments to ask their central banks to print money to finance their activities, rather than imposing taxes on the population. the request to print money can take on different guises, such as a request to cut the interest rate – which initially, under certain circumstances and in the short run may boost growth, but which eventually, after what may be a very short period, leads to inflation. other examples could include a request to finance a particular industry, or to purchase government bonds, or to write off government debts. this danger is particularly acute in democracies, because democratic governments – in all countries and at all times – generally have a short horizon, especially when elections are approaching. hence, despite the fact that printing money ultimately brings inflation, it is not the focus of their concern, despite the destructive impact it has on the economy and the society. in other words, governments in democratic countries have an inflationary tendency. some of us well remember israel ’ s economy thirty years ago, and the crises that resulted from that tendency. price stability should thus be placed in the hands of a professional independent institution that is free of any political consideration and involvement, and that will operate with a longterm perspective. the political systems in advanced countries understood how important this