Israeli Authorities Set Up Situation Room Following Brexitby
Benchmark stock index suffers biggest fall since January
U.K. move not expected to affect Bank of Israel rates decision
Israel’s finance ministry and central bank have set up a situation room to monitor developments following the U.K. vote to leave the European Union.
Israel’s TA-25 benchmark index fell to its lowest point since January, and was down 2.7 percent at 12:42 p.m. in Tel Aviv. The 10-year benchmark government bond soared, pushing yields down 12 basis points. The shekel weakened 1.8 percent on Friday to 3.8820 per dollar.
“We have a strong and stable economy that’s prepared to deal with any scenario and any challenge,” Finance Minister Moshe Kahlon said at a cabinet meeting Sunday. “We will continue to follow events closely and we will know how to react to any developments if needed.”
The European Union is Israel’s largest trading partner and any major shocks to the region’s economy could reverberate here. Still, Israel has diversified away from Europe in recent years, increasingly exporting to Asian countries.
Speaking at the start of the weekly Cabinet meeting, Prime Minister Benjamin Netanyahu said Brexit wouldn’t have a major impact on Israel.
"The Israeli economy is strong. It has very considerable foreign currency reserves," he said. "To the extent that there is some effect, it is not expected to be strong, other than unrest in the global economy."
The Bank of Israel is expected to leave its benchmark base rate at a record-low 0.1 percent in its monthly decision Monday, according to all 14 economists surveyed by Bloomberg. In a departure from previous months, the central bank last month emphasized the predicament for exporters, who saw first-quarter sales minus diamonds and startups fall 12.9 percent, partly due to a strong currency.