Following the Fed, Bank of Israel to End Bond-Buying Program
(Bloomberg) -- The Bank of Israel will end “in the coming months” an 85-billion shekel ($26.3 billion) bond-purchasing program put in place to support the economy during the pandemic. Thursday’s announcement tightens Israel’s monetary policy at a time when inflation is rising and the economic and health pictures continue to improve.
The base rate remained unchanged at 0.1%, in line with the predictions of all 17 economists surveyed by Bloomberg.
- Its research team raised the inflation forecast for the year to 2.5% from 1.7% in July
- The economic growth forecast for 2021 was revised up to 7% from 5.5% in July
- The Bank of Israel’s decision to end quantitative easing follows the lead of the U.S. Federal Reserve, which announced last month that it could begin tapering as early as November
- The shekel strengthened after the interest rate decision, and was trading up 0.2% against the dollar at 3.2311 at 4:12 p.m. in Tel Aviv
- Minutes from Thursday’s monetary committee meeting will be released on Oct. 21
- Inflation has jumped in recent months, hitting an eight-year high of 2.2% year-on-year in August. The global supply chain shortage and surge in commodity prices has caused increases in the cost of imported goods such as cars and furniture
- The August inflation rate figure is above the midpoint of the government’s 1-3% inflation target range
- Israel’s GDP grew by a revised 16.6% in the second quarter as the country bounced back from a first-quarter coronavirus lockdown
- The unemployment rate has also been on the decline, falling to 8% in August
©2021 Bloomberg L.P.