JERUSALEM, May 31 (Reuters) - The Bank of Israel held its
benchmark interest rate at 0.1% for a ninth straight policy
meeting on Monday, citing low but rising inflation and a rapid
economic recovery following a quick COVID-19 vaccine rollout.
All 17 economists polled by Reuters had said they expected
the monetary policy committee to keep rates steady after doing
so ever since cutting them from 0.25% more than a year ago.
Most economists do not expect a rate increase until at least
"The committee will...continue to conduct a very
accommodative monetary policy for a prolonged time," the central
Israel's inflation rate moved to 0.8% in April from 0.2% in
March, just below the government's 1-3% annual target range. The
Bank of Israel believes the rate will reach the target with the
May CPI and based on bond yields, it will rise to 1.7% in a
"Inflation expectations for the coming year from all sources
continued to increase, and are within the inflation target
range," it said.
While the economy contracted an annualised 6.5% in the first
quarter from the prior three months, growth is expected to reach
4-6% in 2021.
Some 55% of Israeli adults have already been fully
vaccinated while active COVID-19 cases across Israel have fallen
to 352 by Monday. As a result, most of the economy has reopened.
"The return to normal life in Israel supports rapid growth
in the coming year," the central bank said.
"However, there are still challenges to economic activity in
view of the health risks in Israel and abroad and the impact to
the economy, particularly the labor market."
Data published earlier in the day showed the jobless rate
dipped to 6.7% in the first half of May from 7.9% in the second
half of April. But the central bank noted difficulties in the
labour markets recovery process.
"The number of job vacancies continues to rise, alongside an
increase in employers difficulty in recruiting new workers in
some industries," it said, partly referring to those preferring
to receive state benefits than returning to work.
The central bank said 11 days of fighting between Israel and
Hamas "apparently had only a limited negative impact" on the
economy while a "significant increase in consumption continued
even in the industries that were particularly hard hit by the
restrictions during the COVID-19 crisis."
After the decision, the shekel was flat at 3.247 per
dollar. It had gained 0.4% since the prior decision on April 19.
Central bank officials have expressed reluctance to lower
the key rate to zero or into negative territory despite a strong
shekel and three lockdowns. Instead, they prefer to use other
measures to stimulate the economy such as buying foreign
currency and government and corporate bonds.
(Reporting by Steven Scheer and Ari Rabinovitch; Editing by
Toby Chopra and Angus MacSwan)