The Bank of Israel expects the economy to rebound quickly in 2021 if the country’s fast start to vaccinating people against COVID-19 is maintained, the central bank said on Monday after keeping rates unchanged.
The bank left its benchmark interest rate at 0.1% for a sixth straight meeting, in line with analysts’ forecasts.
Israel has begun to vaccinate its population at one of the quickest rates in the world, and aims to reach all vulnerable citizens by late January.
The central bank said that if the rapid rate of inoculation was maintained, it forecast the economy to grow by 6.3% in 2021 and 5.8% in 2022.
Growth this year would only reach 3.5%, however, if the vaccination rate slowed, the bank’s economists said in their latest forecasts.
The bank said it thought the rapid inoculation scenario was most likely.
“However, the risks to economic activity remain high, and the adverse impact on the economy, and particularly on the labor market, is expected to be prolonged,” the bank said in its statement.
“The Committee will expand the use of the existing tools, including the interest rate tool, and will operate additional ones, to the extent that it assesses that it is necessary in order to achieve the monetary policy goals and to moderate the adverse economic impact resulting from the crisis.”