The Bank of Israel's Monetary program for November 1999

October 25, 1999

Monetary program for November 1999

The Bank of Israel announced its monetary program for November 1999, according to which the Bank’s interest rate remains unchanged

The Bank of Israel explained that this decision was taken in the light of the dangers in the area of inflation, which are reflected mainly in inflation expectations for a twelve-month horizon and beyond. These are still higher than the path required to ensure the attainment of the inflation target of 3-4 percent per year set by the government for the next two years. Gradual progress has been made recently, however, regarding the inflation environment, and this must be allowed to run its course. These developments must be watched meticulously. It is especially important to observe the nature of the connection between exchange-rate changes and price changes-a connection which seems to have weakened recently-in the light of the great flexibility of the exchange rate in the system of the wide exchange-rate band in which the markets currently operate.

The Bank pointed out that it is important that the budget be approved by the Knesset in accordance with the framework set by the government, in order to reduce the uncertainty surrounding this vital issue. The pursuit of a budget policy in accordance with government decisions, with the implementation of a policy of structural reforms, will contribute to renewed growth.

It is therefore vital for the maintenance of economic stability, which is essential for sustained growth, that a comprehensive economic policy-particularly regarding the budget and the rate of interest-be implemented, consistent with the long-term framework determined by the government’s deficit and inflation targets.