The Bank of Israel left, as expected, the level of interest rates in the economy at 0.1%. This is in line with market estimates, when the lower-than-expected October index slowed the rate of inflation and thus softened the pressure to raise interest rates.
The Bank of Israel is satisfied with the relatively low inflation environment compared to other countries in the world, which allows decision-makers to be more tolerant of raising interest rates. The recent rise in interest rate expectations moderated with the publication of the October index, which indicated a slowdown in the inflation rate from 2.5% to 2.3% in the last 12 months.
The Bank of Israel will complete its purchases of government bonds during December, thus ending the intervention programs in the bond markets announced during 2020.
The bottom line is that the Bank of Israel writes that “the process of the Israeli economy recovering from the crisis continues. However, there are still challenges to economic activity. Therefore, the Committee will continue to pursue long-term monetary policy, in line with growth and employment. And in the economic recovery from the crisis, and to ensure the continued proper operation of the financial markets. “
Regarding the rapid appreciation of the shekel, the Bank of Israel reiterated the mantra that the bargain purchase program may have ended, but this is not the last word. “The committee emphasizes that this threshold (NIS 30 billion – GBS) is not an upper threshold and the Bank continues to operate in accordance with the state of the economy and the continuation of economic activity.”