(Bloomberg) -- Monetary easing is back on the table when the Bank of Israel issues its interest-rate decision on Thursday, the central bank’s first since the struggling economy reentered lockdown last month.Short-term bond markets are pricing in borrowing costs dropping to zero, an outcome also anticipated by several of Israel’s biggest financial institutions. The majority of the economists surveyed by Bloomberg expect the key rate to stay at a record low of 0.1%.Another option analysts are watching for is an expansion of the central bank’s bond purchasing plan beyond 50 billion shekels ($14.8 billion) as a way to jump-start economic activity now that the government has started loosening restrictions.“Extending the program for purchasing government bonds looks almost like a forgone conclusion,” Citigroup Inc. economist Michel Nies said in a research note. “If no extension is announced, the market will probably start asking questions soon.”Central bank policy is back in focus after unemployment rose and consumer confidence cratered as a result of the shelter-in-place orders. The Bank of Israel has taken several steps since the start of the crisis to mitigate the damage, such as buying corporate bonds to lower borrowing costs for businesses, easing requirements for mortgage repayments and reducing banks’ capital buffers to keep credit flowing.The central bank “will continue to do whatever accommodative measures” are necessary, Governor Amir Yaron told Bloomberg TV last week.A rate cut could also slow the appreciation of the shekel, which is trading near the strongest level on record against a basket of currencies, making exporters less competitive. The currency traded about 0.1% weaker against the dollar at 12:25 p.m. in Tel Aviv on Thursday.“It’s clear that a deeper and longer recession implies that for a longer period of time the bank will be following the very expansionary policy with all the tools that it has,” former central bank chief Karnit Flug said in an interview.Among those tools is the ability to purchase more government debt, which the central bank may be forced to do given the expected rise in borrowing costs as the government funds stimulus spending, according to Victor Bahar, chief economist at Israel’s second biggest lender.Israel’s 12-month trailing budget deficit has more than doubled in 2020 to 9.1% of gross domestic product. The Bank of Israel estimates that the figure could rise to 14.6% by the end of the year.“It’s very difficult for the government to absorb such amounts of money without letting yields increase,” said Bahar of Bank Hapoalim Ltd. “They have a lot of room to maneuver,” mainly by buying government bonds, he said.(Updates with Citigroup comment in fourth paragraph, shekel move in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.