Israel Monetary Policy February 2020

Israel: Bank of Israel unleashes array of initiatives to safeguard economy

In recent weeks, the Central Bank has announced a series of steps to reduce the economic fallout from Covid-19. The Bank launched its first quantitative easing program since the Financial Crisis, and will purchase up to NIS 50 billion in government bonds. Moreover, the Bank is offering extra liquidity to financial institutions and cut capital requirements to boost credit supply. Taken together, these measures should reduce the risk of severe financial market stress and cushion the downturn.

On the external front, BoI announced it would use up to USD 15 billion of its FX reserves to satisfy dollar demand, after the shekel plummeted against the USD in mid-March. The move caused the shekel to regain ground, but on 2 April the currency was still down 4.5% month-on-month and 4.8% year-to-date. The weaker shekel could have upsides though, by boosting external competitiveness and thus making it easier for export-oriented firms to weather the downturn.

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