By, 4 Min Read* The Bank of Ireland maintains its 0.1 percent interest rate. * The bank perceives certain risks from mounting COVID-19 cases. * According to experts at the Bank of Ireland, inflation will remain within goal. (Includes macro forecasts, governor remarks, and the shekel’s reaction.) Reuters, JERUSALEM, July 5 – On Monday, the Bank of Israel kept its base interest rate at 0.1 percent for the tenth time, citing threats to the economy from the COVID-19 pandemic’s growing Delta strain. Inflation has begun to rise in Israel, but policymakers, like those at other central banks, say it’s impossible to tell whether the spike is temporary, and pandemic fears remain. Despite the fact that Israel’s economy is mostly open and viral infections are at an all-time low, the number of cases has gradually increased in recent weeks. “At this time, the morbidity level is modest, but the disease’s spread poses some risk to the economy’s sustained recovery,” the central bank said in a statement, referring mostly to the labor market. “As a result, the (monetary) committee will maintain a highly accommodating monetary policy for a long period.” The bank’s staff cut its economic growth forecast for 2021 from 6.3 percent to 5.5 percent, but predicts a 6% increase in 2022. The monetary policy committee, according to all 16 analysts polled by Reuters, is set to hold rates unchanged after reducing them from 0.25 percent more than a year ago. Analysts had hoped for greater clarity from the Bank of Israel on its quantitative easing (QE) programs, given the next rate shift is largely predicted to be an increase in 2022 or 2023. The central bank is around 20 billion shekels ($26 billion) short of a budgeted ceiling of 85 billion shekels ($26 billion) in government bond purchases, which has helped to stabilize bond yields. According to Bank of Israel Governor Amir Yaron, the program is projected to terminate before the end of the year, based on the current rate of acquisition. “We will announce our moves closer to that timeframe, and they will, of course, be conditioned by market conditions at the time,” he said during a press conference. In a bid to contain a strong shekel, the central bank purchased $22 billion of foreign currency in the first five months of 2021, out of a budgeted $30 billion. “We are absolutely not confined to a maximum intervention of $30 billion for this year — when the program finishes,” Yaron said, adding that the bank will continue to intervene in the FX market as needed and in light of economic activity. In late trade, the shekel was unchanged at $3.26 per dollar. The Bank of Israel, on the other hand, said that by October 1, it would cease a program that gives long-term loans to the banking sector in exchange for credit granted to small firms. From 0.8 percent in April, Israel’s inflation rate increased to 1.5 percent in May, around the midpoint of the government’s 1-3 percent annual goal range. The central bank’s economists predict inflation of 1.7 percent in 2021 and 1.2 percent in 2022, with the key interest rate remaining steady in the coming year. They also predict that the budget deficit would fall to 7.1 percent of GDP in 2021 and 3.8 percent in 2022, down from 11.6 percent last year. 3.2629 shekels = $1 Steven Scheer and Ari Rabinovitch contributed reporting, and Toby Chopra edited the piece./n
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