The Monetary Committee of the Bank of Israel decided on Monday to leave its key interest rate unchanged at 4.75%.
The war against terrorists in Gaza and Lebanon that began on Oct. 7 is having various economic effects, both on real activity and on the financial markets, the central bank noted.
The bank has taken a number of policy measures to deal with the situation. The financial markets are functioning and a large part of economic activity is continuing as usual, it said.
In view of the war, the Monetary Committee said its policy is focusing on stabilizing the markets and reducing uncertainty. It has activated a program to sell foreign currency and to provide liquidity in the swap and repo markets.
The interest rate path, and the use of additional monetary policy tools, will be determined in accordance with this policy and with developments in the war, as well as with data on economic activity and the inflation dynamics, in order to continue supporting the markets’ stability and achieving the policy objectives and the needs of the economy, the bank said.
“Since the beginning of the war, the Bank of Israel has been holding ongoing assessments of the effect of the security situation on various economic and financial aspects, and has taken policy steps accordingly,” said BOI Governor Professor Amir Yaron.
“I will expand on that a bit later on. Naturally, a notable portion of the Monetary Committee’s discussions held in the past two days focused on the economic effects of the war. The Monetary Committee analyzed the various processes and their effect on economic activity and inflation, and at the end of the discussions decided to keep the interest rate unchanged at 4.75%,” Yaron said.