In a Reuters interview today, Bank of Israel deputy governor Dr. Nadine Baudot-Trajtenberg said that the interest rate in Israel could fall below zero. She was speaking only two days after the Bank of Israel lowered the rate to a historic low of 0.1%.
"We did what we thought was right," Baudot-Trajtenberg said, adding that the interest rate could fall even further. "I don't think that we have completely exhausted the interest rate tool, and we're certainly considering the use of other tools"
Baudot-Trajtenberg's remarks to Reuters pushed the Tel Aviv Stock Exchange (TASE) up to a record high, and boosted the exchange rates of the shekel against the dollar and euro to NIS 3.94/$ and NIS 4.467/€, respectively.
Baudot-Trajtenberg said in the interview that the Bank of Israel "feels comfortable" with its 3.2% 2015 growth forecast, and that "We should make sure that the shekel devaluation continues."
She went on to say, "We had our concern that looking forward, without the extra push, we won't be able to achieve our growth estimate."
Baudot-Trajtenberg repeatedly emphasized the significance of the shekel devaluation, saying that exports, which account for 40% of Israel's GDP growth, will play a critical role in this year's growth. "Internal demand is reasonable, but it isn't enough, and investments aren't increasing at all. It's clear that part of the reason for the recovery in growth we saw in the fourth quarter is linked to growth in exports, thanks to a more comfortable situation than in the past," she stated, referring to the dramatic weakening of the shekel in recent months.
Published by Globes [online], Israel business news - www.globes-online.com - on February 25, 2015
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