Israeli MPC voted 6-0 to hold rates on July 5 – minutes
JERUSALEM (Reuters) – The Bank of Israel’s six rate-setters voted to keep the benchmark interest rate at 0.1% on July 5, according to Monday’s discussion report.
“They believed that the low level of interest rates supported the continued upturn in economic activity,” the central bank said.
By keeping rates stable for a 10th consecutive decision, the bank cited the economic risks of the emerging Delta variant in the COVID-19 pandemic.
At the same time, the committee believes that there is no fear that inflation will heat up in the midst of an inflation spike in the United States. The annual inflation rate reached 1.7% in June, within an official target range of 1 to 3%.
“While most estimates are that high inflation
in the United States is not expected to persist, the committee was of the view that it remains difficult to determine to what extent the increase in inflation in Israel is transient, but pointed out that inflation in Israel is much lower than in the United States, and there is no worry of a spike in inflation, ”the minutes said.
He noted that an increase in COVID-19 inoculation was boosting the Israeli and global economies.
Growth in Israel is expected at 5.5% in 2021, although policymakers remain concerned about employment, which remains below pre-crisis levels, even though the number of vacancies in some industries persists.
The broadest measure of unemployment showed the unemployment rate fell to 9.0% in June from 9.8% in May.
“The labor market recovery is expected to continue, even at a relatively moderate pace, and apparently a return to pre-crisis unemployment rates is expected to take time,” the minutes said.
Policymakers have also expressed concern over rising housing costs, but noted that budget uncertainty has diminished and will decline further after the adoption of a state budget this year.
They said the central bank’s currency purchases in 2021 aimed at containing the strong shekel could exceed the projected $ 30 billion. Until June, the bank bought some $ 25 billion in foreign exchange.
“The intervention this year is not limited to $ 30 billion, and at the end of the program, the bank will intervene in the foreign exchange market at its discretion, given the state of the economy,” said the central bank.
The committee also voted unanimously to stop a program by Oct. 1 to provide loans to banks for loans to small businesses.
Reporting by Steven Scheer; Editing by Andrew Heavens and Toby Chopra