BoI: no surprises here

ISRAEL - In Brief 30 Nov 2020 by Jonathan Katz

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As expected, policy rates remained unchanged today at 0.1%. In the monetary statement, the MPC stressed the uncertainty of future growth, and when Israel will receive the vaccine. Recovery in the labor market will be prolonged. The second closure was less severe than the first, but opening up has been more gradual.In the second closure, 84% of economy continue to function, compared to 78% in the 1st closure. Inflation environment remains low, and the credit market has been functioning well. The usual statement regarding FX was maintained: “Continued appreciation may have an adverse effect on exports, and is expected to lead to a further slowdown in inflation.” In the BOI slide presentation, there is a slide in which the title is : “Most firms are not reporting significant difficulty in attaining credit..” Same conclusion was reached for the decline in non-housing consumer credit: The BoI sees this as a decline due to a lack of demand” (and not any commercial bank restriction or high cost of consumer credit). There was no change in the forward guidance statements: “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 it is necessary in order to achieve the monetary policy goals and to moderate the adverse economic impact resulting from the crisis.” The BoI revised its GDP forecast in 2020 to -4.5 to -5 (see expect -3.5%), from previously -5 to -6.5. No revisions were made for 2021 - between +1.0 to +6.5% growth depending on the level of control of the pandemic. Basically, The MPC sees no need to adjust the present level monetary accommodation. Despite their descri...