Jerusalem (Reuters) – The Bank of Israel said it would provide the banking system with up to 10 billion shekels ($2.6 billion) in a programme to help small businesses survive Israel’s war with Hamas by gaining access to low-interest loans.
As part of the plan, the central bank will provide banks with two-year loans at the Bank of Israel’s benchmark rate, currently 4.75%, minus 1.5 percentage points.
The central bank acknowledged there is a risk in providing credit to these businesses at this time.
Bank of Israel Governor Amir Yaron said the programme, which will run to the end of January, is another policy tool the central bank has implemented to help the smallest businesses deal with the economic hardship arising from the war.
“We will continue to respond to the various economic issues that arise from the war and will use the various tools at our disposal if necessary,” he said in a statement.
With inflation at 3.8%, against the central bank’s 1-3% annual target, and inflationary effects of the war unclear, the Bank of Israel has been reluctant to lower short-term interest rates for fear of weakening the shekel and adding to price pressures.
Yaron has said that targeted measures, such as previous steps requiring banks to allow customers to defer loan repayments, serve as de facto monetary easing.
