Bank of Israel cuts government bond purchases

Bank of Israel Photo: Shutterstock ASAP Creative

The cut comes against a background of rising inflation and expected higher growth this year.

In the light of the expected rise in the inflation rate and in economic growth in the coming year, the Bank of Israel cut its monthly government bond purchases under its aid program to NIS 3.4 billion in April from NIS 4.4 billion in each of the four previous months.

Over the past year, the Bank of Israel has raised its holding of government bonds to NIS 40 billion, and at the rate of purchases that prevailed at the beginning of the year it was on course to complete the NIS 80 billion quota of purchases that it set by the end of it. Because of the rise in inflation expected this year, the central bank appears to have slowed purchases down in order not to complete the quota. If inflation tends towards the middle of the government's target range (1-3%), the program will probably not extend into 2022.

Meanwhile, long-term government bond yields are rising. Government bond 347 has reached a yield of 2.3%, a level last seen in March 2020.

Published by Globes, Israel business news - en.globes.co.il - on May 9, 2021

© Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Bank of Israel Photo: Shutterstock ASAP Creative
Bank of Israel Photo: Shutterstock ASAP Creative
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