Governor Prof. Amir Yaron announced a reduction of interest rate of 0.15% in light of the crisis in the economy • Meaning for mortgage holders: Monthly repayment will decrease • NIS weakened by 3.4%

• Prof. Amir Yaron Photo: Yossi Seliger

The interest rate on the economy was reduced by 0.1% on Monday, to 0.1%, the Governor of the Bank of Israel announced today, Prof. Amir Yaron. This means that the average mortgage repayment will be reduced by tens of shekels a month and the overdraft interest rate will be reduced.

Prof. Yaron is currently rejecting another interest rate cut, but said in response to the "Israel Today" question, would there be a 0% interest rate cut: "If we reach much more significant and deeper scenarios than the research division forecasts, we have other monetary tools available, including tools. Interest rates. We have the ability to operate in many areas, but at the moment we don't see the need to operate again in interest rates. "

According to estimates by the Bank of Israel Research Division, negative inflation of 0.6% will be recorded over the next four months, the April index alone being negative and falling by 0.5%. Inflation is still expected to rise by 0.9% throughout 2020. The research division added that by the end of 2020, the Bank of Israel's interest rate will be 0% to 0.1% at sea, reflecting a further reduction in interest rates this year. According to the research division, the Bank of Israel's interest rate will be between 0% and 0.25% at the beginning of 2021.

Asked whether a fall in housing prices is expected, the director of the Bank of Israel's research division, Prof. Michel Strabaczynski, was surprised to say that there is an increase in housing prices, but in the future the picture in the construction industry seems to be changing. Prof. Strabaczynski noted that in the shadow of the Corona crisis, especially in the construction industry, there is difficulty in measuring data.

At the remote digital press conference, the bank's supervisor, Dr. Hedva Bar, attended, who discovered that even in the banking system, employees who are infected with Corona and who are absent from work are also faced. Asked whether the morbidity rates in the banking system are reasonable and do not jeopardize the banks' activities, Dr. Barr said: "We do not have any regular data on the Corona morbidity rates in the banking system, but there is undoubtedly exposure."

Dr. Barr added: "Bankers are enlisted and come to work, and work with customers, certainly at banks that are open to the public, and also at banks where there is no public reception. In the shadow of the Corona crisis, there is great financial pressure that bank customers expect to receive."

The Bank of Israel has also announced that it will operate a new monetary instrument: Monetary loans to short-term banks for three years at a fixed interest rate of 0.1%. The loans are contingent on providing credit to small and tiny businesses.

It was also decided to expand the program under which "repo transactions" are conducted with financial bodies, so that the transactions can also include corporate bonds as collateral in addition to government bonds. In this, the Bank of Israel hopes to strengthen its support for liquidity and financial markets.

These steps are being taken against the background of the Corona crisis. Government measures taken to curb the spread of the virus in Israel have interrupted the growth trend and the economy is shrinking. More than a third of it is disabled, private consumption has fallen by about 25% over the pre-crisis period, and about one million workers, 24% of the workforce, have demanded unemployment benefits.

According to the Bank of Israel Research Division, the product contracted by about 5% in the first quarter (in quarterly terms). According to the division's macroeconomic forecast, assuming that most of the health restrictions will be gradually removed by the end of June, negative growth of 5% is expected in 2020 and the unemployment rate will be about 6% (annual average).

Beginning the recovery in the third quarter will see growth of about 9% by 2021, but the unemployment rate is expected to decline gradually. Still, it is not until late 2021 that unemployment is likely to be as low as it was on the eve of the Corona crisis. In this context, the debt-to-GDP ratio is expected to reach around 75% by 2020. However, the Bank of Israel emphasized that uncertainty about the outlook is particularly high as it is unknown when the crisis will end.

In the meantime, in the end of the period the shekel weakened by 3.4% in terms of the effective exchange rate and by 5.8% against the dollar. Currently, the ratio is about NIS 3.6 to the dollar.