On Friday, Governor of the Bank of Israel talked to Reuters during the annual meetings of the International Monetary Fund and World Bank about the possibility of further interest rate cuts, or the use of non-conventional means, to bring inflation in Israel back within the government's price stability target. Inflation is currently running below the target range of 1-3%.
In an interview with Reuters television, Flug said she was more comfortable with the exchange rate than before the Israeli currency's recent depreciation against a broadly strengthening dollar, and that she was not considering putting a floor on the shekel-dollar exchange rate.
Asked if the bank's reference rate, currently 0.25%, could go further to zero, she said, "As we've seen in other countries, the experience is that interest rates can go lower, and there are other tools that central banks have been using, once you reach the zero bound, so there are quite a lot of policy tools in the tool kit."
Reuters points out that Flug declined to specify whether this included so-called quantitative easing, or bond buying, that the US Federal Reserve has used.
"There are different tools, but I think that would not be the right moment to actually specify the tools. We will be following the developments and adjust our policies accordingly," she said.
Published by Globes [online], Israel business news - www.globes-online.com - on October 12, 2014
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