Key Bank of Israel Interest Rate Not Changed

June 27, 2011

In leaving monetary policy unchanged for the coming month, a statement from the Bank of Israel made the following points:

  1. The key rate was raised from 2.0% to 3.25% between late January and late May.
  2. Despite a continuing high 4.1% rate of CPI on-year inflation in May, expected inflation has declined, and the underlying pace over the past three months was within target.
  3. Global economic risks have increased.
  4. As a result of point #3, G7 interest rates remain low, and central bank interest rates elsewhere are expected to rise more slowly than imagined before.
  5. The Israeli economy has likely expanded more slowly in the quarter now ending than it did in 1Q11.
  6. The shekel has been rising.  It’s about 13% stronger against the dollar than a year ago.
  7. Several commodity prices have decline during the past month.

In August 2009, Israel became the first central bank to hike interest rates following the global recession.  The next Israeli interest rate statement will be released on July 25. 

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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