Nov 27 (Reuters) - The Bank of Israel kept short-term borrowing rates unchanged for a fourth straight decision as expected on Monday.
Following are the main points of the bank's post-meeting statement.
For the full statement, click: https://www.boi.org.il/en/communication-and-publications/press-releases/c27-11-23/
* The war is having significant economic consequences, both on real economic activity and on the financial markets. There is great amount of uncertainty with regard to the expected severity and duration of the war, which is in turn affecting the extent of the impact on activity.
* The Israeli economy is strong. In the past, it has demonstrated its ability to recover from difficult periods. The various economic indicators since the beginning of the war have, as expected, pointed to a decline in economic activity, but after a few weeks of war, it seems that the economy is recovering in some components of activity.
* Inflation has moderated, but is still above the target range. Inflation expectations and forecasts are within the target range.
* Following a sharp depreciation of the shekel in the initial weeks of the war, there has been a sharp appreciation, and the shekel strengthened below its prewar level. In view of the recent volatility of the exchange rate, depreciation of the shekel continues to pose a risk to the convergence of inflation to the target range.
* The Bank of Israel Research Department lowered its growth forecast, and in its estimation, GDP will grow by 2 percent in each of 2023 and 2024. The forecast features an especially high level of uncertainty, and includes the assessment that government expenditures due to the war will total about NIS 160 billion. The debt-to-GDP ratio is expected to be 63 percent in 2023, and 66 percent in 2024.
* The volume of activity in the housing market continues to moderate, and the industry is experiencing difficulties as a result of the war. In the past 12 months, home prices have declined by 0.2 percent. The owner-occupied housing component declined by 0.3 percent, and its annual rate of increase continued to moderate, to 4.9 percent.
* In view of the war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity.
The interest rate path will be determined in accordance with developments in the war and the uncertainty derived from it.
Insofar as the recent stability in the financial markets becomes entrenched and the inflation environment continues to moderate toward the target range, monetary policy will be able to focus more on supporting economic activity. (Compiled by Toby Chopra)
