"The steps are certainly on the table, and if we think there is a need, we will use these tools or others as we see necessary," BoI governor says.
The Bank of Israel\’s monetary committee on Thursday left the interest rate unchanged at its record low of 0.1%, but BOI Governor Karnit Flug reiterated the bank\’s willingness to use unconventional monetary policy if necessary.
Noting that Israel\’s economic circumstances had changed since the June meeting where she said unconventional tools were less likely to be used, Flug told reporters that she would "not hesitate" to take steps such as negative interest rates or quantitative easing if they were warranted.
"The steps are certainly on the table, and if we think there is a need, we will use these tools or others as we see necessary," she said.
The decision to maintain the current monetary policy, which Flug reminded reporters was "expansive," came despite stagnant economic growth in the second quarter and negative inflation. BOI forecasts estimated that both were the result of temporary or one-time factors.
August Inflation was, once again, unexpectedly low, coming in at -0.2% instead of remaining stable as forecasters had predicted. Over the past 12 months, prices fell by 0.4%.
Despite the consistent fall in prices, BOI maintained that the negative inflation was not the result of entrenched factors, and was on track to get back to to target range of 1%-3% by the end of next year.