The Monetary Committee of the Bank of Israel has decided to leave the interest rate at 0.1%

The Monetary Committee of the Bank of Israel has decided to leave the interest rate in the economy unchanged, at a rate of 0.1%, in accordance with early forecasts - against the background of the recovery rate from the corona crisis and the need to allow liquidity in the markets.
In previous discussions, the decision to keep the interest rate at the same level was not made unanimously, with one of the six members of the Monetary Committee supporting raising the interest rate to 0.25%. The Monetary Committee is expected to publish in the coming days a summary of the recent discussions and the nature of the voting of the committee members.
In the last two months, a number of countries have raised interest rates, including Poland, Hungary, Chile, South Korea, the Czech Republic and New Zealand. In other countries, such as Canada and the United Kingdom, interest rate hikes have been brought forward, amid fears of an inflationary outbreak.
Inflation data in Israel, the highest in the last decade, could also have accelerated the Bank of Israel raising interest rates, in order to reduce market demand and moderate price increases. Although the October index rose by only 0.1%, compared with a forecast of a 0.4% increase, mainly due to a decrease in the prices of flights and tourism abroad and a decrease in income from vehicle taxation. However, inflation (the index has risen in the last 12 months) - Above the middle of the Bank of Israel's target range (1% -3%).
However, the Governor of the Bank of Israel, Prof. Amir Yaron, repeatedly reiterates in his recent speeches that inflation data are mostly temporary and stem from difficulties in the supply and transportation chain, while next year price increases will moderate. This position indicates relatively less motivation to raise interest rates at the current time, and to continue the expansionary policy to allow markets to recover after the corona crisis.
At the same time, the employment market is showing a rapid recovery and the broad unemployment rate is around 7% - lower than earlier forecasts for the average unemployment rate in the last quarter of 2021. Recovery in the employment market, along with a record number of job vacancies. On the other hand, growth figures in the third quarter were slightly disappointing, and the forecast growth according to economists in 2021 fell to 6.3%, compared with an earlier forecast for growth of more than 7%.
The forecast of the Bank of Israel's Research Division is that a single interest rate increase of 0.25% may be made by the third quarter of 2022. Analysts' forecast is that the interest rate will remain stable in a similar range.
The discussions of the Monetary Committee also dealt with the question of the exchange rate of the shekel. In the last month, the dollar exchange rate fell by almost 4% against the shekel, and today it fell in continuous trading to a level of NIS 3,074 per dollar, but then recovered slightly. The appreciation of the shekel, which hurts exporters, supports the decision not to raise interest rates soon so as not to further strengthen the shekel. On the other hand, the Monetary Committee also discussed the possibility of expanding the purchase of dollars to moderate the appreciation of the shekel.