As expected: the interest rate stayed unchanged at 0.1%

Bank of Israel left, as expected, the interest rate unchanged at 0.1%, the Monetary Committee headed by the Governor of the Bank of Israel, Prof. Amir Yaron, announced today (Monday). Background to the decision: the expected opening of the economy after the third closure, and the negative index (-0.1%) recorded in January.
The Bank of Israel notes that the economy is in the process of exiting the third quarantine and although its economic impact has been more moderate than expected, the level of morbidity is still high and the spread of infectious mutations makes it difficult to return to increased economic activity.
The Bank stated that: "Despite the optimism from the vaccination campaign, the damage to the economy and in particular the labor market is likely to be prolonged. Therefore, the Committee will continue to use a variety of tools to deepen monetary policy "Including the interest rate tool, and will use additional tools, as long as you estimate that this is necessary to achieve the objectives of monetary policy, and to mitigate the economic damage created as a result of the crisis."
The economic data before the committee is a contraction in GDP in 2020 by 2.4%, and in terms of GDP per capita by 4.1%, less than the contraction that was forecast. The broad unemployment rate rose during the third closure, reaching about 20% in the second half of January after falling to about 13% in the period between the two closures. The inflation environment remained low but continued a moderate upward trend, with the January 2021 index falling by 0.1% after falling by the same rate in the December 2020 index, and inflation in the last twelve months standing at 0.4%. "Against the background of the expansionary policy and the global inflation environment, inflation expectations for the coming year from all sources have risen and are in the vicinity of the lower limit of the target (1% -3%)," the bank noted.
In January, the Research Division of the Bank of Israel updated its macroeconomic forecast for the next two years. The forecast for 2021 includes two main scenarios: the first - rapid immunization of the population by May 2021, and the second - a more ongoing immunization process - by June 2022. In the rapid vaccination scenario, GDP is expected to expand by 6.3% in 2021 and 5.8% in 2022. The inflation rate in the next four quarters (ending in the fourth quarter of 2021) is expected to stand at 0.6% and in 2022 at 0.9%.