Bank of Israel holds benchmark rate at 0.1%, to buy corporate bonds

JERUSALEM (Reuters) – The Bank of Israel held its benchmark interest rate at 0.1% on Monday and announced measures such as buying corporate bonds in the secondary market to ensure a low cost supply of credit and help the economy cope with the coronavirus.

Thirteen of the 15 economists polled by Reuters believed the monetary policy committee would hold the line on rates after holding pat in May following a reduction from 0.25% on April 6. Two analysts expected a 10 basis point cut to 0%.

Central bank officials have expressed reluctance to lower the key rate from a current all-time low to zero or to negative territory, instead preferring to use other measures such as buying currency and bonds.

In an updated economic forecast, the central bank projects a 6% contraction in 2020, compared with a prior estimate of a 4.5% contraction. It foresees economic growth of 7.5% in 2021, above its estimate in late May of 6.8%.

The bank’s staff reiterated an estimate that it expects the key rate to be in a 0-0.1% range in a year’s time.

(Reporting by Steven Scheer and Ari Rabinovitch; Editing by Tova Cohen)