The Bank of Israel left the interest rate unchanged today at 0.5%. The move was in line with most analyst forecasts.
The Bank of Israel explained that its decision to leave the interest rate unchanged for June at the current level, which is the lowest ever in Israel's history, along with what it called the exceptional measures it is taking - purchases in the foreign currency market and the government bond market - will help strengthen the economy’s ability to cope with the effects of the global economic crisis. The decision will support the achievement of the inflation target, real economic activity, and the stability of the financial system.
Governor of the Bank of Israel Prof. Stanley Fischer continues to lead the bank in taking the unconventional steps of buying $100 million per day (and $50 million on Fridays), and buying NIS 200 million of government bonds each day.
Investors were looking to the Bank of Israel's notice of the interest rate decision to try to gain an insight into future moves.
The Bank said that one of its considerations was that data from the financial side, and recently also from the real side, indicate that the negative trend in economic activity may be moderating, adding that renewed growth is expected only towards the end of the year. The Bank of Israel's notice said that at this stage, the low interest rate together with the other tools that the Bank of Israel is operating are helping the economy return to positive growth.
Another consideration in the bank's decision was that inflation expectations in Israel for the next twelve months, both those of the forecasters and those derived from the capital market, are around the midpoint of the target range.
Published by Globes [online], Israel business news - www.globes-online.com - on May 25, 2009
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