The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has kept the interest rate unchanged at its historic low of 0.1%.
The Bank of Israel noted that since its last interest rate decision, the cabinet has approved a state budget but there has been a rise in morbidity and serious Covid cases due to the Delta variant, resulting in the reintroduction of some restrictions, which could hinder the economy's recovery.
The Bank of Israel added that the rise in infections also greatly influences uncertainty about economic activity in the short and medium term, although the booster vaccination is expected to help lessen serious morbidity and reduce the damage to the economy.
The Bank of Israel still sees many economic challenges ahead due to the resurgence of Covid and therefore said it would continue its accommodative monetary policy for a prolonged time. There is no specific update about its government bond purchasing policy - as of July the Bank of Israel had used up 84% of the NIS 85 billion it had allocated for the program.
On unemployment the Bank of Israel said that labor market data are continuing their trend of return to the pre-crisis situation. Labor Force Survey data for July indicate a decline in the broad unemployment rate to a monthly average of 8.4%, and even lower in the second half of the month. On inflation, the Bank of Israel notes that the CPI has risen 1.9% over the past 12 months and that expectations derived from the capital market and from inflation contracts are at the midpoint of the target range (1%-3%), while those of professional forecasters are lower.
Published by Globes, Israel business news - en.globes.co.il - on August 23, 2021
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