BREAKING NEWS

Bank of Israel keeps interest rate unchanged at 0.1%

MAY 25, 2020 16:33

The Bank of Israel Monetary Committee decided on Monday to leave its benchmark interest rate unchanged at 0.1%, citing unprecedented contraction in the scope of economic activity and a steep increase in the number of jobseekers.

In April, the central bank cuts the rate from 0.25% to 0.1%, echoing similar measures taken by central banks worldwide to ensure the orderly functioning of financial markets amid the coronavirus outbreak.

The bank's research department provided a more optimistic estimate as it updated its macroeconomic forecast published last month. GDP is now expected go contract by a total of 4.5% in 2020, compared with the 5.3% contraction detailed in the bank's April forecast. The economy is then expected to grow by 6.8% in 2021, compared with 8.7% in the bank's April forecast.

The more moderate forecast was based on the bank's previous assumption that restrictions to contain the coronavirus outbreak would be lifted gradually by the end of June. Recovery is expected to be more prolonged than previously thought, however, due to the impact of social distancing restrictions that are "expected to create friction in economic activity."

Unemployment is expected to reach 8.5% in the second half of 2020, and decline to approximately 5.5% toward the end of 2021.

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