Israeli Central Bank Rate Cut 15 Basis Points to 0.15%

April 6, 2020

The Bank of Israel’s monetary policy rate has been lowered back to the low of 0.10% that prevailed from January 2015 until a 15-basis point increase in late November 2018. Previously, the rate had crested at 3.25% prior to 2011 but was lowered by 75 basis points per year over four consecutive calendar years through 2014. Today’s rate reduction was complemented by the unveiling of a new lending instrument consisting of 3-year loans to banks at 0.1% providing those funds are then extended as credit to small firms. Also, allowed collateral for previously announced repo transactions were today expanded to include corporate bonds as well as government securities.

A statement released by the central bank today projects that Israeli GDP will drop 5% in 2020 and that unemployment will not settle back to the pre-Covid crisis level until the end of 2021. Officials cite a dollar shortage both worldwide and in Israel, which in the latter case is being alleviated in part by using the recently opened swap line between the Fed and Bank of Israel. The shekel fell almost 6% against the dollar last quarter, but inflation nonetheless faces downside risks in the short run.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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