Bank of Israel Holds Key Interest Rate Steady at 2.0%

November 26, 2012

Since peaking at 3.25% after the May 2011 monthly meeting, Israel’s key interest rate has been cut five times, each by 25 basis points and most recently last month.  But as expected, a sixth reduction was not implemented at this month’s meeting.  The Bank of Israel’s monetary policy statement expressed contentment with inflation and expected inflation.  The latest observations put such at 1.8% and 1.9%, near the middle of the central bank’s 1-3% medium-term target corridor.  In addition, comments on Israeli growth were a bit more upbeat.  The recent fighting in Gaza is not expected to produce a discernible impact.

Most economic indicators which became available this month support the assessment that moderate growth in activity has continued, and is expected to continue in the coming months. These indicators are consistent with the Research Department forecast of 3.3 percent GDP growth in 2012 and 3 percent growth in 2013. Various surveys of economic activity continue to indicate pessimism and projections for moderation in activity.

The five rate cuts were announced in September 2011, November 2011, January 2012, June 2012, and October 2012.  The next meeting of the Monetary Policy Committee is scheduled for December 24.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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