Finally, a unity government in Israel + dovish MPC protocol

ISRAEL - In Brief 21 Apr 2020 by Jonathan Katz

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Prime Minister Netanyahu and Blue & White party leader Gantz have signed an agreement to form a unity government. Under the agreement, Netanyahu and Gantz will rotate the premiership. Netanyahu will serve as prime minister for eighteen months and Gantz for eighteen months after him. The original Blue & White party broke up two weeks ago, after party head Gantz decided to enter Netanyahu’s government. Forming a government will make it possible to pass a budget for a year and a half and release funds to handle the economic crisis and undertake spending in other areas that were on hold for a long time. A unity government is likely to facilitate implementing policy necessary for economic recovery. Political stability is sorely needed in Israel after three rounds of elections in the past year. The minutes of the latest Monetary Committee meeting are out. According to the minutes, the decision to lower the interest rate to 0.1% was supported by five members of the Monetary Committee, while one member voted for lowering the interest rate to 0 percent. The one member argued that the intensity of the crisis and its impact on labor markets required lowering the interest rate to 0 percent. The committee members argued that it was important to ease the cost of credit along the entire yield curve. The interest rate discussions, including the zero interest rate option, reflects a dovish attitude toward monetary policy. The Committee noted that weaker demand and lower oil prices were factors likely to put further downward pressure on inflation in the period ahead. The committee members negate the assumption that the negative impact on the production chain of many products may lead to...