Bank of Israel keeps benchmark interest rate at 0.1%

FILE PHOTO: The Bank of Israel building is seen in Jerusalem June 16, 2020. REUTERS/Ronen Zvulun

JERUSALEM (Reuters) – The Bank of Israel held its benchmark interest rate at 0.1% for an eighth straight meeting on Monday amid optimism over an economic recovery due to a rapid COVID-19 vaccine rollout and inflation turning positive.

All 16 economists polled by Reuters had said they expected the monetary policy committee to keep rates steady after doing so ever since cutting them from 0.25% a year ago.

Israel’s economy contracted by 2.6% in 2020, less than expected, but is forecast to expand at least 5% in 2021 given more than half of Israeli adults are already vaccinated and the economy has largely reopened.

The inflation rate moved to 0.2% in March from 0.0% in February.

Central bank officials have expressed reluctance to lower the key rate from an all-time low to zero or into negative territory despite a strong shekel and three lockdowns. Instead, they prefer to use other measures to stimulate the economy such as buying foreign currency and government and corporate bonds.

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