2023-10-17 12:48:05
The Bank of Israel suggested Tuesday that it is in no rush to cut interest rates despite Israel’s war with Hamas in Gaza, as it would likely weaken the shekel and push inflation higher. .
The central bank will decide its interest rates on Monday and the bond market has started to anticipate the start of rate cuts. Policymakers increased the rate to 4.75% from April 2022, when it was 0.1%, but left rates unchanged at their last two meetings in July and September.
In a meeting with economists, Deputy Governor Andrew Abir said the central bank was focused on stabilizing financial markets and creating maximum certainty for the economy and the public at this time.
To that end, the bank said last week it would sell up to $30 billion in foreign currencies to avoid a sharp weakening of the shekel, which had already depreciated some 10 percent against the dollar this year. year before the war between Israel and Hamas broke out on October 7.
Since the start of the last conflict, the shekel has lost another 4% and stands at 4 to the dollar. It reached this level on Monday for the first time since 2015.
“The bank started using a specific tool to stabilize the foreign exchange market, which helped stabilize and calm other markets as well,” Abir told economists, according to the central bank.
“And our goal is that other monetary policy tools do not pose a problem to this objective in the immediate future.”
He reiterated Governor Amir Yaron’s comments this week that the main inflationary risk over the past nine months was the depreciation of the shekel and would continue to be so.
The central bank said the influence of shekel movements on inflation could reach 20% or 1.5 points. On Sunday, official data showed that Israel’s inflation rate fell to 3.8% in September from 4.1% in August, still above the official target of 1-3%. A Archyde.com poll predicted a rate of 4.1%.
Mr. Abir also said that to ease the burden of loan repayments on households and businesses, and to provide greater certainty, the Bank of Israel had outlined a deferral of these payments for the the entire population, in particular for people who have been affected by the conflict, without interest or fees.
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