By Ed Frankl


Israel's central bank on Monday held its interest rate at its first meeting since the attack by Hamas, likely in an effort to keep depreciation of the shekel in check, despite the war inflicting new uncertainties on the country's economy.

The Bank of Israel kept its benchmark rate at 4.75% for the third meeting in a row, coming after a series of rate rises since April 2022, when it was 0.1%.

The bank said there is uncertainty regarding the depth and duration of the impact of the war, but that the country's economy is "strong, stable, and based on solid foundations" and has demonstrated its ability in the past to recovery from difficult periods.

"In view of the war, the monetary committee's policy is focusing on stabilizing the markets and reducing uncertainty," it said.

Analysts had considered that the bank might cut rates in order to support the economy, which has faltered since Hamas's surprise attacks.

The tourism sector has seen tumbling demand as international airlines cancelled flights, and retail and hospitality has suffered as many shops and restaurants temporarily closed. Meanwhile, hundreds of thousands of Israelis have been called up as reservists into the country's armed forces, leading to a staff shortage in parts of the economy, especially in the successful tech industry.

In refreshed economic forecasts, the central bank said it now expects the economy to grow by just 2.3% in 2023 and 2.8% in 2024. It previously said gross domestic product would expand by 3.0% in both 2023 and 2024.

The bank's move to hold rates will likely be seen as supporting the shekel, which the BOI said has depreciated 6.3% against the dollar and 4% against the euro since the last interest-rate decision in September.

The shekel weakened slightly against the dollar after the meeting, with USD/ILS up 0.1% at 4.0618.

Shortly after Hamas's attack on Oct. 7, the bank said it would sell up to $30 billion in foreign currencies and to make swap transactions up to $15 billion in the foreign-exchange market in a bid to prop up the shekel.

More than 1,400 people were killed in Israel in the Oct. 7 attacks. Over 4,600 Palestinians have been killed in Gaza in the past two weeks, according to the Hamas-led health ministry.


Write to Ed Frankl at edward.frankl@wsj.com


(END) Dow Jones Newswires

10-23-23 0949ET