Bank of Israel Interest Rate Benchmark Left at 2.0%

November 22, 2010

Israel’s central bank has implemented six 25-basis point rate hikes since August 2009, the latest being done in September of this year.  Today, as in October, the key rate was left at 2.0%, but this time the rate corridor in the credit window was doubled from plus or minus 0.25% to plus or minus 0.50%.  That step, like the six rate hikes done earlier, was portrayed part of a policy normalization process in a statement released today.  Israeli GDP expanded 3.8% annualized during the third quarter and by 4.3% from a year earlier.  CPI inflation of 2.5% now is seen likely to accelerate above target during 1H11 but to settle back into target thereafter.  Elevated house price inflation and slight above-target expected inflation are being monitored, but officials are also sensitive to the danger that with many central banks having still-low interest rates that tightening in Israel might exert excessive upward pressure on the shekel.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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