The Bank of Israel's Monetary program for January 2000

December 27, 1999

Monetary program for January 2000

The Bank of Israel announced its monetary program for January 2000, according to which the Bank’s interest rate is reduced by 0.5 of a percentage point.

The Bank of Israel explained that the decision to reduce the interest rate reflects further progress in lowering the inflation environment, expressed chiefly in the continued reduction in expected inflation for a one-year horizon and beyond-as seen in expectation indices derived from the capital market and from various inflation forecasts-and in the rate of increase of the money supply, which is consistent with the target rate of inflation.

The Bank of Israel stressed the importance of continuing with the cautious interest policy which takes account of the dangers on the financial and inflation fronts, while focusing on bolstering economic stability and securing the low inflation environment. All the above is necessary to ensure the attainment of inflation target set by the government for the years 2000 and 2001.

The Bank of Israel noted that Knesset approval of the budget in accordance with the framework and composition set by the government, and determined implementation of structural reforms which increase competition, are essential to reducing economic uncertainty and continuing the advance towards renewed and sustainable growth. All the above constitutes part of the macroeconomic strategy which continues to strive towards maintaining economic and financial stability, while integrating Israel’s economy into the global one. This strategy is essential for bringing the economy onto a path of sustainable growth.