Israel's central bank decides to halt the reduction of interest rates
Israel's central bank has chosen to maintain the interest rates at 4.5 percent, highlighting the delicate balancing act that policymakers are engaged in. They are tasked with managing the dual objectives of bolstering economic growth while also addressing potential risks like inflation, volatility in the shekel's value, and geopolitical uncertainties. Although recent indications of price growth suggest there is room for implementing stimulus measures, worries about government expenditure and potential downgrades in credit ratings have restrained the central bank from pursuing further monetary policy easing.
The most recent rate decision comes after the Bank of Israel's decision in January to decrease its benchmark interest rate by 0.25 basis points. This was the first rate cut since April 2020. While economists generally agreed that interest rates would continue to decrease, there was disagreement regarding the timing of the next move. Some anticipated another reduction at the upcoming meeting in April.
According to World Bank data, the war inflicted severe damage on Gaza's civil and residential infrastructure, resulting in a projected contraction of the gross domestic product by 3.7 percent. This represents a significant deviation from the previous growth forecast of 3.2 percent, with the economy now virtually at a standstill.
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