Economy
Bank of Israel Acts to Stabilize Shekel Amidst Escalating Conflict
© Reuters
On Tuesday, amid the escalating Arab-Israeli conflict sparked by a Hamas assault on Israel, the Bank of Israel initiated measures to stabilize the shekel and prevent its further depreciation. Following the massacre in southern Israel on October 7, the bank has put into motion a plan to sell up to $30 billion from its foreign currency reserves to support the shekel, which is nearing NIS 4/$ due to depreciation.
Golan Benita, head of the Bank of Israel’s Markets Department, stated that this intervention seeks to mitigate the effects of the security crisis and prevent market overreactions. While acknowledging that the impact on markets has been sharp due to the “beginning of the event,” he emphasized that it has not reached extreme levels. The bank is continuously assessing the security situation and its potential impacts on markets with an aim to prevent market overreactions.
In a G30 group speech, Governor Amir Yaron highlighted the bank’s focus on market stability against inflationary risks due to shekel depreciation. Deputy Governor Andrew Abir outlined their foreign exchange sale program during a meeting with financial forecasters, which has effectively stabilized various markets.
To alleviate financial burdens, the bank introduced a comprehensive plan for interest-free and fee-free loan repayment deferment for all, especially those adversely affected, relieving the “interest weight.” The bank remains vigilant and flexible, deploying appropriate policy tools in response to unprecedented security conditions.
Meanwhile, the Palestinian banking sector now faces instability risks due to the conflict. Once deemed stable by IMF, banks are grappling with liquidity management issues primarily from excess physical shekel cash holdings caused by Israeli restrictions on West Bank cash transfers. Despite asset quality deterioration, banks have maintained ample capital (16.4% of risk-weighted assets) and exceeded pre-Covid-19 profitability by mid-2023. Liquidity stood at 40.3% and non-performing loans at 4.1%. The sector, comprising seven local and six foreign lenders, operates against a backdrop of declining real GDP growth with the economy expected to converge at 2% over the medium term.
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© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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