JERUSALEM, Nov 30 (Reuters) - The Bank of Israel held its
benchmark interest rate at 0.1% for a fifth straight
meeting on Monday, citing optimism that a coronavirus vaccine
would help the economy rapidly recover from damage caused by the
pandemic next year.
"However, the adverse impact on the economy, and
particularly on the labor market, is expected to be prolonged,
and the committee will therefore continue to utilize a range of
tools in order to increase the extent of the monetary policy
accommodation and to ensure the continued orderly functioning of
the financial markets," the bank said in a statement.
Policymakers have preferred to keep the key rate above zero,
using bond purchases and other measures to support the economy
as unemployment has jumped to more than 20% after two
It also has been intervening in the foreign exchange market
to help stem the dollar's decline. The U.S. currency has fallen
to a 12-1/2-year low of 3.3 versus the shekel.
"Continued appreciation (of the shekel) may have an adverse
effect on exports, and is expected to lead to a further slowdown
in inflation," which stands at an annual rate of -0.8%, the bank
The central bank introduced no new measures on Monday after
deciding on Oct. 22 to expand government bond purchases while
offering loans at low rates to banks to encourage lending to
It reiterated that the monetary policy committee would use
existing tools, including lowering interest rates, and will
operate additional ones if deemed necessary "to achieve the
monetary policy goals and to moderate the adverse economic
impact resulting from the crisis."
The bank's staff updated its forecast for 2020, saying it
expected a 4.5% economic contraction. Should the virus crisis
worsen and require more restrictions, the economy would shrink
5%, it said. It did not change 2021 estimates for growth of as
much as 6.5%.
The Finance Ministry earlier in the day estimated a 2020
contraction of 4.2% to 4.8% and growth in 2021 of 2.4% to 4.5%.
Fifteen of 16 economists polled by Reuters had believed the
monetary policy committee would keep rates steady at its final
meeting of 2020 after holding pat in May, July, August and
October following a reduction from 0.25% in early April.
With most of the economy open during the summer after the
first lockdown, growth spiked to an annualised 37.9% in the
third quarter, according to preliminary data, after a 29.8%
contraction in the previous three months.
(Reporting by Steven Scheer; editing by Toby Chopra, Larry