Israel holds rate but ends business lending program

     Israel's central bank left its key interest rate unchanged, as expected, and while it reiterated it will "continue to conduct a very accommodative monetary policy for a prolonged time" it also began unwinding some of its extraordinary easy monetary policy by wrapping up a lending program.
     Bank of Israel (BOI) kept its interest rate unchanged at 0.10 percent, unchanged since April last year when it was cut for the first time in five years in response to the hit to economic activity from the COVID-19 pandemic.

     "The rapid recovery of economic activity continues," BOI said, adding there were not any material restrictions on economic activity at this point.

     However, since mid-June there had been an increase in a number of virus cases due to the Delta varian and this posed a risk to a continued recovery of the economy.

      The central bank's research staff lowered its forecast for economic growth this year to 5.5 percent from  the April forecast of 6.3 percent but raised the 2022 forecast by 1.0 percentage point to 6.0 percent.

      BOI said it had ended one of the programs that it had set up last year to help businesses cope with the impact of the pandemic. 

      Among BOI's programs put into effect last year - in addition to rate cuts - were a deferral of loan payments to banks for households and businesses, a reduction in banks' capital requirements and a loan program to banks against credit to small businesses along with bond purchases.

      As of Oct. 1, BOI will wrap up its program that provides long-term loans to the banking system against loans that are provided to small and micro businesses or upon the utilization of the program's 40 billion shekel.

     "With the removal of restrictions and the recovery of the economy, there is less need for the specific program to provide long-term loans to the banking system against loans to be issued to small and micro businesses, and the operation of this tool will be halted," BOI said.

      Inflation in Israel continued to rise to positive levels after registering negative rates much of last year, hitting 1.5 percent in May, up from 0.8 percent in April.

     BOI said inflation expectations for the coming year have continued to rise but remain within the target range of 1.0 to 3.0 percent.

UPDATE- This week in monetary policy: Israel and Romania (CANCELLED)

    (Following item is updated with the cancellation of the Jan. 8 monetary policy meeting by the National Bank of Romania's board. The Feb. Feb. 9 meeting has also been cancelled.)

    This week - January 4 through January 9 - only the Bank of Israel is scheduled to decide on monetary policy.

    The National Bank of Romania's event calendar had included a board meeting on monetary policy issues on Jan. 8, 2021 but its calendar also continued to include a note from March last year that its board had suspended any previously scheduled meetings due to the elevated uncertainty surrounding economic and financial developments.

     Instead, board meetings to discuss monetary policy would be held "whenever necessary."

     Following table includes the name of the country, the date of the next policy decision, the current policy rate, the local time a policy decision is announced, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.
    The table is updated when the latest decisions are announced and can always be accessed by clicking on This Week.

 

WEEK 1
JAN 4 - JAN 9, 2020:
ISRAEL	4-Jan	0.10%	16:00	0	0	0.25%	DM

    

www.CentralBankNews.info

Israel maintains rate but boosts asset purchases

     Israel's central bank left its main interest rate steady but boosted its purchases of government bonds and said it would continue to implement an accommodative monetary policy after a second lockdown last month to prevent the spread of COVID-19 led to a sharp decline in economic activity.

     The Bank of Israel (BOI) kept its main interest rate at 0.10 percent, unchanged since April when it cut it for the first time in five years in response to the economic hit from the coronavirus.

     Prior to the April rate cut, BOI on March 23 launched a program to purchase 50 billion shekels of government bonds in the secondary markets to lower the cost of credit and boost economic activity.

     "In view of the crises continuing to impact Israel and the world, the Committee decided to increase the government-bond purchase program by NIS 35 billion and thus continue to support financing ability in the economy, in view of the strengthening of the coronavirus crises and its economic effects," BOI said, adding the bond purchases will allow it to lower the cost of credit for companies and households as a complementary tool to its short term interest rate policy.

    "The Monetary Committee will continue to operate the tools at its disposal to the extent necessary in order to implement the extent of monetary accommodation required, and to ensure the continued orderly activity of financial markets in Israel," BOI said, adding it will expand the use of its existing tools, including the interest rate tool and operate additional ones to the extent it assesses the crises is lengthening and moderate the negative economic impact.

     BOI also decided to extend credits to banks at a negative 0.1 percent against loans they give to small businesses at an interest rate not exceeding the prime rate plus 1.3 percent.

     After recovering following the first lockdown in the Spring, Israel's economy took a hit after a second lockdown was imposed on Sept. 18 after the country saw a surge in infections.

     Prior to the second lockdown, unemployment had stabilized around 11 to 12 percent but it then jumped to 19 percent in the second half of September as the number of unemployment rose by about 300,000, the central bank said.

     BOI's research staff has forecast two possible scenarios. Under the first, in which control over the pandemic is achieved, the economy is expected to contract by 5 percent this year and then expand by 6.5 percent in 2021.

     But in a more serious scenario, BOI sees growth contracting by 6.5 percent in 2020 and expand by just 1 percent in 2021, with debt also rising more.

     Israel's gross domestic product shrank by an annual 7.9 percent in the second quarter of this year after expanding by 0.5 percent in the first quarter. On a quarterly basis, GDP shrank 8.1 percent in the second quarter and shrinking 1.8 percent in the first quarter, meeting the technical definition of recession.

     Israel is also experiencing deflation, with consumer prices falling by 0.7 percent in September, the 6th consecutive month of deflation.

     Although the shekel is skirting with 10-year highs against the U.S. dollar, the BOI is more concerned with its trade-weighted level and against the euro - most of Israel's trade is with the euro area - the shekel has lost ground this year.

     After tumbling in March, the shekel has risen steadily against the dollar and was trading at 3.38 after today's decision, up 2.4 percent since the start of this year.

     But against the euro, the shekel was trading at 4.0 today, down 3 percent this year.

Israel maintains rate as economy seen contracting less

     Israel's central bank left its main interest rate unchanged at 0.10 percent and while its staff now sees less of a economic contraction this year than it forecast last month, the monetary policy committee still left the door open for further easing if the crises were to continue.
     In April the Bank of Israel (BOI) cut its key rate for the first time in five years in response to the economic slowdown from measures to contain the COVID-19 pandemic and has also been using a range of other monetary tools to boost accommodation and ensure the orderly functioning of financial markets.
     "The Committee will expand the use of the existing tools, including the interest rate tool, and will operate additional ones, to the extent that it assesses that the crises is lengthening and it is necessary to achieve the monetary policy goals and to moderate the negative economic impact created as a result of the crises," BOI said.
     But compared with its last policy statement in April, BOI staff is more upbeat as some of the restrictions imposed to contain the spread of the coronavirus have been lifted.
    Real time data point to a recovery of economic activity in some industries, though activity is still low and in other industries where limitations have not been removed, activity remains around the lowest level.
     In a special update to its economic forecast, the bank's staff now sees an economic contraction this year of 4.5 percent, less than April's estimate of a 5.3 percent contraction.
     In 2021 Israel's gross domestic product is seen expanding 6.8 percent, down from April's forecast of 8.7 percent, assuming there won't be another wave of infections and restrictions.
     BOI said the first estimate of gross domestic product in the first quarter shows an annual 7.1 percent contraction.
     The gradual removal of restrictions after the Passover holiday is reflected in economic activity but the recovery is expected to take a long time and the adverse impact will be notable, BOI said.
     Israel's shekel was volatile in March, plunging just over 9 percent from March 1 to March 18 before the central bank offered $15 billion in currency swaps, helping the shekel firm so it was only down 2.8 percent by the end of the month against the U.S. dollar.
    This month it has been more stable, trading at 3.52 to the dollar today to be down 1.7 percent since the start of the year.
     BOI noted the shekel was now back to its pre-crises level, saying "to the extent that the exchange rate stabilizes at this level, it will weigh on the recovery of exports, particularly in view of the decline in global demand, and on the return of inflation to within the target range."
     Israel's inflation rate has decelerated sharply, with consumer prices down 0.6 percent in April from zero percent in March. In April BOI's staff forecast inflation this year would average a negative 0.8 percent before rising to a positive 0.9 percent in 2021.
     The fall energy prices has put downward pressure on inflation worldwide and BOI said short-term inflation expectations are below its target range of 1.0 to 3.0 percent while medium and long-term expectations are within its range.
     "At this point, there are no signs of an inflationary impact from the adverse shock to supply," BOI said, adding the crises has made it more difficult to calculate and analyze the meaning of changes to prices.

Israel cuts rate 1st time in 5 years as economy to shrink

     Israel's central bank cut its key interest rate for the first time in five years, launched a new monetary instrument to provide loans to banks for three years and expanded its repurchase transactions to include corporate bonds as security as it slashed its 2020 growth forecast and now expects a contraction of 5.3 percent, assuming the main restrictions to contain the spread of the coronavirus will be removed by the end of June.
      "The coronavirus crises halted the trend of growth and the economy has shifted into contraction," the Bank of Israel (BOI) said.
     BOI cut its main interest rate by 15 basis points to 0.10 percent and it is now the same from March 2015 until November 2018.
      BOI last cut its rate in March 2015 BOI and then held it at 0.10 percent until raising it in November 2018 on optimism over improving economic growth.
     "More than one-third of the economy is shut down, private consumption is lower by about one-quarter relative to the pre-crises period, and approximately 1 million workers, 24 percent of the workforce, have claimed unemployment benefits," BOI said.
     BOI's rate cut today underlines how fast the spread of the virus is hitting the global economy, forcing economists and central banks to ratchet down their expectations.
     It was only in February BOI's monetary policy committee confirmed it was expecting to maintain the rate at 0.25 percent for a prolonged period while it was intervening in foreign exchange markets to ensure its policy stance would remain accommodative despite the tightening from a rising shekel.
     However, BOI also said it had a range of tools at its disposal to make its policy more accommodative if needed but was optimistic the spread of the virus would be halted in coming months and the overall impact on the global economy would be limited.
     On March 4 BOI still didn't see any "evidence of a significant" impact on the country's economy from the spread of the virus and was still expecting a relatively quick recovery of the global economy.
     But by mid-March the deterioration in financial markets was accelerating as COVID-19 spread.
     On March 15 BOI began offering repo transactions to ensure bond markets would function smoothly, then on March 20 it cut the capital requirement for banks to ensure they could meet the rising demand for credit, and on March 23 it began purchasing government bonds in the secondary market to offset a lack of liquidity that was raising the cost of longer-term credit for firms.
     "The Committee will expand the use of the existing tools, including the interest rate tool, and will be able to operate additional ones, to the extent that the crises lengthens and it is necessary to achieve the monetary policy goals and to moderate the negative economic impact created as a result of the crises," BOI said.
     Despite the uncertainty about the extent of the virus, BOI now expects the economic recovery to begin in the third quarter, boosting growth in 2021 to 8.7 percent though the unemployment rate is expected to only decline gradually from an estimated 6 percent average this year and reach pre-crises levels by the end of next year.
     Inflation, which already was falling sharply in the second half of last year, is forecast by the bank's staff to be negative this year, at minus 0.8 percent, before rising 0.9 percent in 2021.
     BOI's interest rate is seen in the range of 0.0 to 0.1 percent at the end of this year and then rise to between 0 and 0.25 percent by the end 2021.
     BOI's new monetary tool with provide the banking system with fixed-rate loans at 0.1 percent for 3 years, with a size of 5 billion shekels and through the month of May, to increase the supply of credit to small businesses.
     It is also examining ways to effectively lower the interest rate on credit to small businesses even further as its move to buy government bonds in March may mainly affect credit to large companies.
     Starting on April 7, BOI will expand its repurchase tool and for the first time include corporate bonds rated AA or higher, as collateral, in addition to government bonds.

This week in monetary policy: Israel, Australia, Poland, South Korea and Serbia

    This week - April 5 through April 11 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Australia, Poland, South Korea and Serbia.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 15
APR 5 - APR 11, 2020:
ISRAEL	6-Apr	0.25%	0	0	0.25%	DM
AUSTRALIA	7-Apr	0.25%	-20	-50	1.50%	DM
POLAND	8-Apr	1.00%	-50	-50	1.50%	EM
SOUTH KOREA	9-Apr	0.75%	-50	-50	1.75%	EM
SERBIA	9-Apr	1.75%	-50	-50	3.00%	FM

    www.CentralBankNews.info

Israel cuts reserve requirement to ensure flow of credit

      Israel's central bank, one of the few central banks to have kept interest rates steady this year, lowered its capital requirement for regulatory purposes by 1 percentage point "to ensure the banks' ability to continue offering credit" during the coronavirus crises.
      The Bank of Israel (BOI), which has kept its key rate steady since raising it in November 2018, said its banking supervision department lowered the requirement for large banks to maintain a minimum Common Equity Tier 1 (CET1) ratio of 9 percent from 10 percent and to 8 percent from 9 percent for midsized and small banks.
      Israel's banks entered the coronavirus crises in a strong position, BOI said, adding they have large capital surpluses, strong liquidity ratios and high-quality credit portfolios.

     "Since the outbreak of the crises, demand for credit has increased sharply, and the risk level in credit provision has increased in parallel in view of the impact to the to the financial state of businesses and households," BOI said, adding it expects to use the capital that has been released to increase credit to businesses and households.

      Given their central role in societies, banks have always been required to hold certain amounts of capital to absorb unexpected losses. Years ago, capital meant gold or silver but today it comprises a many forms of stock or equity invested by its owners and shareholders, government and private securities and loans that generate interest.
      The requirements and methods of measuring capital has changed over the decades, with the most recent changes following the global financial crises. Banking regulators worldwide, grouped under the Basel Committee, tightened the requirements significantly to ensure banks would remain financially sound even during an economic or financial crises.
      CET1 is the most basic form of liquid assets that a bank can hold, such cash and stock.
      Another measure of reserve requirements is based on deposits at a bank. BOI has for many years set a 6 percent reserve requirement against demand deposits but the bank's statement did not say whether this ratio was changed.
       BOI said its decision to lower the capital requirement was in line with similar decisions in other countries and would be valid for six months and would be extended if necessary.
       In response to the crises, central banks worldwide have been slashing both reserve requirements and countercyclical capital buffers.
      The buffer was created after the global financial crises to ensure banks raise their capital during economic booms as a countercyclical measure so they can draw it down during a crises.
       BOI said the today's reduction of the capital requirement was based on the 2 percent capital buffer of each bank's total risk assets, an excess demand that went beyond the Basel standards to protect the country's banking system and the economy from unforeseen developments.
       BOI also instructed boards at banks to "re-examine their dividend and share buyback policies," in light of the material change in economic conditions, freeing up additional sources that can be used to provide credit and absorb losses, if necessary.
      This is similar to a move by the Czech National Bank (CNB).
      On March 16, when CNB cut its rate for the first of two times this month, it also cut the countercyclical capital buffer for its banks and said it expected banks to "refrain from a any dividend payouts or any other steps that might jeopardize individual bank's resilience."
       BOI's monetary policy committee is scheduled to meet on April 6. At its last meeting on Feb. 24, it maintained is key interest rate at 0.25 percent and confirmed its guidance that it expected to maintain the rate at this level for "a prolonged period."
       On March 15 the policy committee decided to carry out open market operations, offer repo transactions to financial institutions and purchase government bonds of various types and maturities "in necessary quantities" to ensure smooth functioning of the bond market.
      On March 23 BOI then said it would purchase 50 billion shekel of government bonds in the secondary market to ease the volatility in bond yields from a lack of liquidity and lower the cost of longer-term credit for firms and households as a complement to its low interest rate policy.

     www.CentralBankNews.info

   

Israel holds rate, says has range of tools if hit by virus

     Israel's central bank left its key interest rate steady at 0.25 percent and confirmed its recent guidance that it expects to maintain this rate for a prolonged period or to reduce it to ensure inflation stabilizes around the midpoint of its target range and the economy continues to grow strongly.
     The Bank of Israel (BOI), which has kept its rate steady since raising it in November 2018 for the first time since 2012, also reiterated it was taking additional steps to make monetary policy more accommodative, a reference to its intervention in foreign exchange markets to curb the strong shekel.
     While the outbreak of the coronavirus in China is "casting uncertainty regarding future economic activity globally and in Israel," BOI said its baseline scenario is that the spread of the virus will be halted in coming months and the overall impact on the global economy will be limited.
    "The Bank of Israel's assessment in this scenario is that no significant macroeconomic impact is expected in Israel," it said.
     However, if the crises were to spill over into additional countries and preventative measures are required in Israel, it is expected to have a more significant economic impact.
    "In such as scenario, the Monetary Committee has a range of tools to make monetary policy more accommodative," BOI said.
     Israel's inflation rate has been below the lower bound of BOI's 1.0 - 3.0 percent target range since June last year and fell to 0.3 percent in January from 0.6 percent in December.
     "The moderation of inflation is largely influenced by the appreciation of the shekel," BOI said, adding it is possible the inflation rate may be negative in coming months before moving back toward the lower bound of the target range in the second half of the year.
     The shekel has been rising since early 2019 and BOI has a history of intervening to curb it.
     In November and December last year BOI purchased $3.6 billion in one of its biggest bouts of intervention in nearly a decade, and at the end of January BOI's foreign exchange reserves rose $3.9 billion from end-December to $129.97, mainly due to foreign exchange purchases totaling $2.95 billion.
     In its January press conference, BOI Governor Amir Yaron affirmed the banks' readiness to prevent "excessive appreciation of the shekel, by purchasing foreign exchange whenever necessary" as it sees the rise due to short-term financial factors.
     But BOI's foreign exchange intervention has not dented the shekel much and today it was trading around 3.43 to the U.S. dollar today, up 0.9 percent this year and close to historic lows seen during the global financial disruptions in January 2018, July 2014 and June 2011.
     Since the start of 2019 the shekel has risen almost 10 percent against the U.S. dollar.
     Against the euro, the shekel has been hitting record highs since mid-2019 and was trading around 3.72 to the euro today, up 4.3 percent this year and up 16 percent since the start of 2019.
     Israel's economy has been growing around its long-term rate in recent months and gross domestic product grew 3.8 percent in the fourth quarter of last year, up from 3.5 percent in the third quarter.
     BOI said data from January point to continued growth but the interim budget is expected to have a "markedly contractionary effect" in the first half of 2020.

This week in monetary policy: Israel, Paraguay, Kyrgyzstan, Hungary, Botswana, South Korea, Fiji, Gambia, Mozambique & Bulgaria

    This week - February 23 through February 29 - central banks from 9 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Paraguay, Kyrgyz Republic, Hungary, Botswana, South Korea, Fiji, Gambia, Mozambique and Bulgaria.

    The central bank of Mauritius was scheduled to hold a monetary policy meeting on Feb. 26 but this has been postponed and a new date will be announced later. Bloomberg reports the government has named a new governor and second deputy governor. 

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 9
FEB 23 - FEB 29, 2020:
ISRAEL	24-Feb	0.25%	0	0	0.25%	DM
PARAGUAY	24-Feb	4.00%	0	0	5.00%
KYRGYZSTAN	24-Feb	4.25%	0	0	4.50%
HUNGARY	25-Feb	0.90%	0	0	0.90%	EM
BOTSWANA	26-Feb	4.75%	0	0	5.00%
SOUTH KOREA	27-Feb	1.25%	0	0	1.75%	EM
FIJI	27-Feb	0.50%	0	0	0.50%
GAMBIA	27-Feb	12.50%	0	0	12.50%
MOZAMBIQUE	27-Feb	12.75%	0	0	14.25%
BULGARIA	28-Feb	0.00%	0	0	0.00%	FM

    www.CentralBankNews.info

Israel maintains rate but still sees steady or lower rate

    Israel's central bank left its key interest rate steady at 0.25 percent, as expected, and confirmed its guidance that it "will be necessary to leave the interest rate at its current level for a prolonged period or to reduce it" to ensure inflation stabilizes around its the midpoint of its target range.
    The Bank of Israel (BOI), which has maintained its rate since raising it in November 2018 for the first time since 2011, added its monetary policy committee "is taking additional steps as necessary to make monetary policy more accommodative," a reference to its intervention in foreign exchange markets to weaken the strong shekel.
     Israel's shekel rose in 2019, prompting expectations last year the central bank would cut rates to stem further gains.
     Instead, BOI in November opted to intervene in the foreign exchange markets to weaken the shekel and boost inflation and has bought more than $3.5 billion of foreign currency since Nov. 25, 2019.
     In response to today's policy decision, the shekel weakened 0.3 percent to 3.47 to the U.S. dollar after rising 8.3 percent in terms of an effective exchange rate in 2019, "a development that continues to make it difficult to return inflation to the target range," BOI said.
     Underlining the BOI's dovish policy stance, its research staff lowered its forecasts for economic growth and inflation in 2020, and forecast the key interest rate would be between 0.25 percent and 0.1 percent in the coming year before gradually rising toward the end of 2021.
     Israel's inflation rate dropped to a lower-than-expected 0.3 percent in November from 0.4 percent in October and BOI lowered its forecast for inflation to be 1.0 percent in 2020, down from its previous forecast of 1.2 percent but up from 0.4 percent in 2019.
     BOI targets inflation of 1.0 to 3.0 percent.
     Economic activity in Israel last year was better than BOI had expected, with gross domestic product up an estimated 3.3 percent, on strong public and private consumption.
     BOI lowered its forecast for 2020 growth to 2.9 percent from October's forecast of 3.0 percent, and forecast 3.2 percent growth in 2021.
     BOI said the government's interim budget is expected to have a "markedly contractionary effect" in the first half of this year and there is continuing uncertainty about budgets after that.
     "Global economic activity continues to slow, but its seems that the risks of a significant deterioration have declined in view of progress in the trade negotiations between the US and China and the results of the UK elections," BOI said, adding additional monetary easing by major central banks "has reached its limits at this stage."

UPDATE-This week in monetary policy: Israel, Serbia, Sri Lanka, ECB, Namibia, Peru & Singapore

    (Following item has been updated with Singapore)

     This week - April 7 through April 13 - central banks from 7 countries or jurisdictions are scheduled to decide on monetary policy: Israel, Serbia, Sri Lanka, euro area (European Central Bank), Namibia, Peru and Singapore

    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, and the rate one year ago.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 15
APR 7 - APR 13, 2019:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
ISRAEL	8-Apr	0.25%	0	0	0.10%
SERBIA	9-Apr	3.00%	0	0	3.00%
SRI LANKA	10-Apr	8.00%	0	0	7.25%
EURO AREA	10-Apr	0.00%	0	0	0.00%
NAMIBIA	10-Apr	6.75%	0	0	6.75%
PERU	11-Apr	2.75%	0	0	2.75%
SINGAPORE	12-Apr	N/A	N/A	N/A	N/A

    www.CentralBankNews.info

Israel holds rate, confirms 'gradual and cautious' hikes

       Israel's central bank kept its key interest rate at 0.25 percent, as expected, and confirmed its guidance from January that "the rising path of the interest rate in the future will be gradual and cautious" to help stabilize inflation around the midpoint of its target range and support economic activity.
      The Bank of Israel (BOI), which surprised many analysts by raising its rate by 15 basis points in November last year - the first rate hike since June 2011 - added Israel's economy returned to its long-term growth rate in the fourth quarter of last year after slowing in the second and third quarters.
     Israel's economy grew 0.7 percent in the fourth quarter of 2018 from the third quarter with annual growth of 2.67 percent for estimated 2018 growth of 3.2 percent.
      In January the BOI lowered its 2019 growth forecast to 3.4 percent from 3.6 percent and forecast 3.5 percent growth for 2020. The central bank's composite index of the economy rose 0.28 percent in January for the highest reading since August 2018, driven by a rebound in manufacturing.
     But inflation remains near the lower bound of BOI's target range of 1.0 to 3.0 percent, rising to 1.2 percent in January from 0.8 percent in December and is expected to hover near this level in coming months.
     Boosted by BOI's rate hike, the shekel has risen since late December, with BOI saying if this rise continues it could delay inflation's rise toward the midpoint of its target.
     The shekel was trading at 3.6 to the U.S. dollar today, up 4.4 percent this year.
     Last month BOI forecast 1.3 percent inflation this year and 1.8 percent in 2020, with bank staff forecasting the key rate to rise once in the third quarter to end 2019 at 0.50 percent and another hike in the first quarter of 2020 to end the year at 1.25 percent.

Israel holds rate as BOI staff push back rate hike to Q1

      Israel's central bank left its key interest rate steady at 0.10 percent, saying the "forces supporting an increase in inflation still prevail" while the bank's economists pushed back their forecast for the first rate hike in seven years to early next year.
     The Bank of Israel (BOI), which is slowly moving towards raising its rate for the first time since June 2011, added the inflationary environment had not changed markedly since the last monetary policy meeting and a possible sharp rise in in the shekel's exchange rate still presents the main risk to inflation becoming entrenched within its target.
      BOI's monetary committee repeated its guidance that it would maintain the accommodative policy "as long as necessary in order to entrench the inflation environment within in the target range."
     Israel's inflation rate eased to 1.2 percent in August from 1.4 percent in July but was still within the BOI's target range of 1.0 - 3.0 percent.
      In August five of the monetary committee members voted to maintain the rate - it has been steady since March 2015 - while one member voted for a 15 basis point rate hike, similar to the previous four decisions.
      According to the August minutes, the committee believes there is room to prepare markets for the possibility of higher rates but any increase in interest rates before inflation is entrenched within the target range may delay this process and ultimately slow the path of raising rates.
       Taking note of the recent decline in inflation, the central bank's research department pushed back its forecast for the BOI to raise its rate to the first quarter of next year to 0.25 percent from July's forecast for a rate hike in the fourth quarter of this year.
     "The deferral is slight because we assess that the moderate inflation of recent months is only transitory, and that the inflation rate will continue to increase at a pace similar to our assessment in July," the bank's research department said.
     By the third quarter of 2019 BOI staff expect the rate to be raised one more time to 0.5 percent.
     The forecast for inflation was also lowered slightly in light of lower than expected inflation and the rise in the shekel that was not expected.
     Inflation is forecast to be 1.5 percent by the end of 2019 but only 0.8 percent at the end of this year, down from 1.2 percent forecast in July.
     The forecast for economic growth was unchanged, with gross domestic product seen expanding 3.7 percent this year, up from 3.5 percent last year, and 3.6 percent in 2019, up from 3.5 percent.
     After falling from January to mid-August, Israel's shekel rose against the U.S. dollar until late September before easing again.
     Today it slipped in response to the bank's statement and was trading at 3.64 to the dollar, down 4.4 percent since the start of this year.

This week in monetary policy: Serbia, Israel, Argentina, Peru and Singapore

    This week - October 7 through October 13 - central banks from 5 countries or jurisdictions are scheduled to decide on monetary policy: Serbia, Israel, Argentina, Peru and Singapore.
    Following table includes the name of the country, the date of the next policy decision, the current policy rate, the result of the last policy decision, the change in the policy rate year to date, the rate one year ago, and the country’s MSCI classification.

    The table is updated when the latest decisions are announced and can always accessed by clicking on This Week.

WEEK 41
OCT 7 - OCT 13, 2018:
COUNTRY	DATE	RATE	LATEST	YTD	1 YR AGO
SERBIA	8-Oct	3.00%	0	-50	3.50%
ISRAEL	8-Oct	0.10%	0	0	0.10%
ARGENTINA 1)	9-Oct	n/a	n/a	n/a	27.75%
PERU	11-Oct	2.75%	0	-50	3.50%
SINGAPORE	12-Oct	n/a	n/a	n/a	n/a
1) From Oct. 1 Leliq rate changes daily

    www.CentralBankNews.info