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
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