The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has raised the interest rate by 0.5% to 3.25%. This is the sixth rate hike made by the Bank of Israel since April, when it raised the rate from its historical low of 0.1% to 0.35%.
After two successive hawkish 0.75% hikes last month and in late August, the Bank of Israel Monetary Committee this time opted for a more moderate 0.5% rise, although some analysts had expected a 0.75% hike again. The Israeli central bank is striving to tackle inflation, which has been running at more than 5% over the past 12 months in Israel. Although this is well below inflation in the US and in many European countries, it is still worrying.
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The Bank of Israel said, “The Israeli economy is recording strong economic activity, accompanied by a tight labor market and an increase in the inflation environment. The Committee has therefore decided to continue the process of increasing the interest rate. The pace of raising the interest rate will be determined in accordance with activity data and the development of inflation, in order to continue supporting the attainment of the policy goals.”
The Bank of Israel added, “One-year inflation expectations derived from the capital market are within the target range, and one-year expectations from the other sources are around the upper bound of the target range. Expectations for the second year and onward from the capital market are within the target range. Since the previous monetary policy decision, the shekel strengthened by 3% against the US dollar, and by 0.7% in terms of the nominal effective exchange rate. In contrast, the shekel weakened by 2.8% against the euro.”
Published by Globes, Israel business news – en.globes.co.il – on November 21, 2022.
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