The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, announced this afternoon that it is keeping the interest rate unchanged at 4.5%. Economists were divided on whether the interest rate would remain unchanged or cut, with “Bloomberg” reporting that most economists predicted a cut while the markets priced in the rate staying unchanged.
Last month the Bank of Israel cut the rate from 4.75% to 4.5%. This was the first interest rate cut in Israel since March 2020 at the start of the Covid pandemic. The cut followed a run of 10 rate hikes between April 2022 and May 2023, which saw the rate rise from a historic low of 0.1% to 4.75%, as the Bank of Israel sought to combat rising inflation.
RELATED ARTICLES
Goldman Sachs sees shekel strengthening
The battle against inflation has come a long way in 2023, peaking at 5.3% in January and falling to 2.6% in January well within the annual 1%-3% target range. The Bank of Israel expects inflation to fall to 2.4% by the fourth quarter of 2024 and 2% by the fourth quarter of 2025.
The Bank of Israel said, “In view of the war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity. The interest rate path will be determined in accordance with the continued convergence of inflation to its target, continued stability in the financial markets, economic activity, and fiscal policy.”
The Bank of Israel remains concerned that inflation could rise again and said, “The Committee’s assessment is that there are still a number of risks of a potential acceleration in inflation: the effects of the war and its progress on economic activity, the constraints on activity in the construction industry, a depreciation of the shekel, and fiscal behavior.”
Published by Globes, Israel business news – en.globes.co.il – on February 26, 2024.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.
