Bank of Israel No Longer Considering Negative Interest Rates

Central bank cites rebound in economic growth and higher inflation in ruling out using unconventional monetary tools.

Bank of Israel chief Karnit Flug presenting the new 200-shekel bill, December 2015.
Emil Salman

The Bank of Israel said Wednesday that it was no longer considering negative interest rates or using other unconventional monetary tools, given a rebound in economic growth and higher inflation.

The central bank’s benchmark interest rate has been 0.1% for two years, amid talk that it might eventually fall to below zero in line with other developed-country central banks, or that it might engage in massive bond-buying.

But in the last several months, economic growth has rebounded, with gross domestic product expanding at a 6.2% annual rate in the fourth quarter.

The bank’s monetary policy committee “believes that conditions have not come about requiring the use of unconventional tools such as bond purchases or negative monetary interest, in view of the unexpectedly strong growth data, strength of the labor market, increase in medium-term inflation expectations, and long-term expectations that remained in the middle of the (1%-3 %) target range,” the bank said.