BoI keeps rate unchanged, ups inflation forecast

Amir Yaron

The level of GDP in 2022 is expected to be only 1.4% lower than the level that had been expected prior to the crisis.

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%, as expected.

The Bank of Israel Research Department’s staff forecast projects that GDP will grow by 6.3% in 2021, the same as its previous forecast for an optimistic scenario regarding Covid-19. The unemployment rate is expected to decline to 7.5% by the end of 2021. In 2022, growth of 5% is expected, so that the level of GDP in 2022 is expected to be only 1.4% lower than the level that had been expected prior to the crisis. The unemployment rate in 2022 is expected to continue to decline, to about 6% in the fourth quarter of the year, still higher than the pre-crisis level.

The Bank of Israel added, "The inflation environment remains low, but a moderate upward trend continues. The CPI increased by 0.6% in March, following an increase of 0.3% in the February CPI - both higher than expected -and inflation in the past 12 months is 0.2%. Inflation expectations for the coming year from all sources increased, and are at the lower bound of the inflation target range (1%-3%). Medium- and long-term inflation expectations are anchored within the target range.

On the shekel, the Bank of Israel said, "Since the previous interest rate decision, the shekel strengthened by 1% in terms of the nominal effective exchange rate and against the euro, while it weakened by 0.4% against the dollar.

The Bank of Israel sees the budget deficit narrowing to 8.2% of GDP by the end of 2021, from 11.6% at the end of 2020.

Published by Globes, Israel business news - en.globes.co.il - on April 19, 2021

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

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