JERUSALEM (Reuters) – The Bank of Israel dropped its benchmark interest rate at 0.1% for its seventh direct meeting Monday, announcing hopes that the country’s COVID-19 inoculation program’s rapid pace would boost economic growth this year.
Israel this week began to emerge from a nearly two-month third lockout that the central bank said had a more moderate impact on economic activity than previous rounds.
About half of Israel’s 9.3 million citizens have been vaccinated, offering hope of a return to growth, but the central bank stressed that the risks to the economy remain high.
“The vaccination campaign is progressing rapidly but the spread of more infectious changes and the still high level of morbidity are putting pressure on the return to strong economic activity,” the bank said in a statement.
Despite an unemployment rate of around 15%, the Israeli economy maintained an estimate of 2.4% in 2020, well below the central bank’s 3.7% forecast.
It will project a 6.3% spurt in 2021 if the pace of vaccinations is maintained, noting that studies show that more and more companies believe they can continue under the current conditions. currently for more than half a year.
Inflation, the Bank of Israel said, remains low at -0.4% in January but is still moving higher and could reach 1% – an official 1% -3% annual target base – in a year’s time.
All 15 economists surveyed by Reuters had said they expected the monetary policy committee to maintain stable levels after ever doing so from cutting them from 0.25% in early April last year. .
Central bank officials have said they are willing to reduce the high to zero or into negative territory despite a strong penny and three locks. They prefer to use other measures to stimulate the economy such as buying currency and government and corporate bonds.
After a spike in the hawk to a 24-year high against the dollar in the 10 days following the advance decision on Jan. 4, the central bank said it would buy at least $ 30 billion of foreign currency in 2021 – leading to the dollar gaining to 3.26 pence from 3.11.
“This move is expected to support export performance in the aftermath of the crisis, and for inflation to return to its target range,” the Bank said.
Reporting by Steven Scheer; Additional commentary by Ari Rabinovitch; Edited by Hugh Lawson