Moody’s: Passing Israeli budget would be ‘credit positive’

Five of six interest rate setters on BoI’s monetary policy committee voted to stay at 0.1%, minutes show

The Knesset’s approval of a new government marks the end of protracted political deadlock and will allow for the passage of a budget, a positive for the country’s credit rating, ratings agency Moody’s said Monday.

“Although this is likely to result in a fragile and potentially short-lived government, we expect the lack of ideological cohesion to increase incentives to focus primarily on economic policies rather than more divisive issues,” Moody’s analysts said in a research note.

“The passage of a new budget will be key to gaining greater visibility on the medium-term fiscal policy outlook after the weakening we have observed in Israel’s fiscal policy effectiveness in recent years, in part because of the polarized political environment,” they wrote.

Moody’s rates Israel at A1 with a stable outlook.

Meanwhile, Five of six Bank of Israel rate setters voted to keep the benchmark interest rate at 0.1% on May 31, minutes of the discussions showed on Monday.

One committee member supported a reduction to 0.0%, citing concerns over unemployment.

The five members who voted to keep the interest rate unchanged thought that the low level “supports a recovery of economic activity and a gradual return of inflation to the target range, particularly in view of the Bank of Israel using additional tools in the credit market and in the foreign-exchange market.” (Reuters)