Bank of Israel keeps interest rate steady at 0.1%

The Bank of Israel has decided to keep the interest rate unchanged from 0.1%, despite the financial crisis brought on by the pandemic.

In the decision, the Bank of Israel also lays out two scenarios for the recovery of the economy after GDP in the second quarter of 2020 contracted by 11% compared to forecasts.

“The Research Department’s staff forecast describes 2 possible scenarios. In the relatively optimistic scenario, in which control of the spread of the virus is maintained, GDP is expected to contract by 4.5 percent in 2020 and to grow by 6 percent in 2021. In the more severe scenario, in which there is only partial control of the pandemic, accompanied by a further deterioration in the global situation, negative growth of 7 percent is expected in 2020 and growth of only 3 percent in 2021.

“The debt to GDP ratio in 2021 is expected to be 78 percent in the optimistic scenario and 87 percent under the pessimistic scenario,” it says.