Israel: Bank of Israel cuts rates and introduces extra monetary easing measures in April
April 6, 2020
At its 6 April meeting, the Bank of Israel (BoI) cut its policy rate from 0.25% to 0.10%, announced a new monetary instrument to provide loans to banks and expanded repo transactions to include corporate, as well as government, bonds. This came after a series of measures in March including bond purchases and lower capital requirements.
The decision to ease policy in April was driven by a desire to protect the economy, which the BoI now expects to contract 5.3% this year. Moreover, the Bank sees price pressures—which were already subdued before Covid-19—weakening notably going forward, providing a further rationale to cut rates.
Looking ahead, the BoI struck a dovish stance, and said it stands ready to “expand the use of the existing tools, including the interest rate tool, and will be able to operate additional ones” to protect the economy.
According to Goldman Sachs: “Going forward, we expect the BoI to keep the policy rate at its current level for a prolonged period and deliver any additional easing through increased liquidity and credit measures”.
Author: Oliver Reynolds, Economist