By Steven Scheer
TEL AVIV, April 2 (Reuters) - Israel's central bank may lower short-term interest rates for the first time in five years next week in response to a likely recession stemming from the coronavirus outbreak, although some analysts believe the time for a reduction has passed.
In a Reuters poll of 12 economists, six believed the monetary policy committee (MPC) would keep its benchmark rate ILINR=ECI at 0.25% when the decision is announced on Monday at 4 p.m. (1300 GMT), while the other six predicted a cut to 0.1%.
"The Bank of Israel has had many chances to cut so if they didn't, it's unnecessary in their opinion," said Alex Zabezhinsky, chief economist at the Meitav Dash brokerage.
He noted that the shekel ILS= has depreciated sharply after soaring in 2019, so that a cut in borrowing costs is no longer needed to weaken the currency.
Those forecasting steady rates believe the Bank of Israel could have followed an easing of monetary policies by the U.S. Federal Reserve and other central banks in recent weeks. Instead, with the rate so low, it pursued other policies such as buying government bonds and foreign exchange intervention.
Using its high foreign currency reserves, the central bank allocated up to $15 billion for swap transactions to expand liquidity in the foreign exchange market and said it would buy 50 billion shekels ($14 billion) of government bonds to lower long-term yields.
Leader Capital Markets chief economist Jonathan Katz said that while the bank's quantitative easing policies will help bring down medium and longer-term rates, a interest rate cut would help those borrowing at shorter durations.
"We are in a dire economic situation, and fiscal policy is not that expansionary so monetary policy can do more, including corporate bond purchases," he said.
Israel's economy has been struggling under tight government restrictions that require most Israelis to stay at home. The number of job seekers has jumped to more than 1 million, putting the jobless rate at about 25% -- from less than 4% before the coronavirus crisis began.
More than 6,000 Israelis are infected with the virus, most of them with mild symptoms, while 25 have so far died.
Israel's government unveiled an 80 billion shekel ($22 billion) aid package on Monday to help the economy weather the crisis.
The Bank of Israel last week projected an economic contraction of 2.5% in 2020 as long as the partial lockdown is eased by the end of April, while Bank of Israel Governor Amir Yaron signalled no rate reduction is planned for now.
"All options are always on the table and we are always monitoring the situation, but we haven't seen the need to deal with the interest rate," Yaron said at the time.
Prior to the coronavirus crisis, the bank had estimated growth of 2.9% this year, down from 3.5% in 2019.
($1 = 3.6525 shekels)
(Reporting by Steven Scheer; Editing by Catherine Evans)