For the first time in its history, the Bank of Israel will not be publishing a scheduled decision on monthly interest rates, because of a labor dispute at the bank.

The central bank was supposed to announce tomorrow interest rates for May. It announced that because of the cumulative effect of labor sanctions, the announcement will be delayed.

Decisions on lending rates are not arbitrary rulings by the governor, Dr David Klein. They are based on a many parameters. The three key elements are macroeconomic data on Israel and key markets, forecasts for change in these data, and assessments by the bank's different divisions regarding inflation compared with the targets set by government.

In other words, reaching an interest rate decision is a complex process involving an enormous amount of work from collating data to analyzing it to consolidating a recommendation - done by the entire central bank. The process has been derailed by the work slowdown.

Another problem is that at the direction of labor representatives, the central bank has not been publishing information as usual, which compromises the transparency of its monetary policy.

The central bank announcement today notes that labor actions have been going on for three months, and are disrupting essential activities at the bank. The bank's management said it is gong its utmost to minimize the damage to its services to the public.

The central bank has asked the government to approve orders confining the workers, to preserve a minimal level of service to the public. The problems are not confined to creating and setting monetary policy. The central bank's activities in supervising Israel's commercial banks are also impaired, as are decisions regarding management of Israel's foreign currency reserves.

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The central bank's list of essential activities impaired by the disruptions at the orders of the labor representatives:

1. Daily discussions on daily interest rate auctions, headed by the chief of the monetary division, are not being held.

2. The weekly monetary forum headed by the governor himself are being held, but they do not have all the pertinent information in hand. Decisions are being made on the basis of partial data.

3. The central bank's four divisions monetary, research, foreign currency, and foreign currency supervision - are not holding their internal discussions ahead of the monthly monetary policy meeting. Usually each division consolidates a recommendation on interest rate changes.

4. The monthly monetary policy meeting of the four departments, headed by the governor, is not taking place. At these meetings, analysts present figures, forecasts and assessments regarding trends in the United States, Europe and Japan (interest rates, exchange rates, developments in the financial markets and in real activity) and discuss the implications of these developments on the Israeli economy.

They also discuss capital movements to and from Israel and its effect on exchange rates; forecasts for growth and employment; and alternative scenarios to the expected inflation based on econometric models of the monetary and research departments.

5. As a result, the top-level monetary forum headed by the governor did not convene.