By Steven Scheer

JERUSALEM, (Reuters) – The Bank of Israel will likely keep short-term rates at the same level this week. This is its thirteenth consecutive such decision. However, some analysts think it should reduce rates to stop the shekel, which stands at a 26 year high compared to the dollar.

All 16 economists polled for Reuters think the central bank’s monetary committee (MPC), will maintain the benchmark rate at a record low of 0.1%. The announcement is expected to be made Monday, at 4:00 p.m. (0400 GMT).

Many analysts believed that the next move would come as soon as 2022. This was due to the rapid rise in inflation and the widespread COVID-19-vaccine rollout. At that meeting, one MPC member voted for a rate increase to 0.25 percent.

Shekel’s value has risen as high as 7 percent compared to the dollar from late 1995. The shekel is currently the best performing emerging currency, despite lower inflation and third-quarter GDP growth than was expected.

Analysts stated that Monday’s meeting will focus on the handling of shekels since October was the last month for the bank to plan to purchase $30 Billion worth foreign currency. There has however been some intervention.

Although exporters are furious, the policymakers appear to be allowing the shekel to grow since it helps lower import prices as well as contain inflation.

There are many reasons why the bank could reduce interest rates. These include the rise in the shekel and moderation in inflation. The fear of the return of the coronavirus, as well as the fears of it. It is unlikely to keep it unchanged, mainly due to other central banks raising rates,” Amir Kahanovich (chief economist at the Excellence Investment House) said.

Israel’s inflation rate fell from 2.5% in September, an 8-year record. The government is still within its 1-3% annual target.

The rate of interest is projected to reach 2.8% over the next twelve months based on the yield of bonds, though economists predict an average 1.8%.

Over the three prior months, the economy experienced an average annual growth rate of 2.4% during the third quarter. This is well below the expectations of 6%. The government as well as the central bank expect 7% growth by 2021.

Naomi Feldman is the former senior economist of U.S. Federal Reserve and has taken over from Reuben Gronau.