A Dovish Statement from the Bank of Israel

December 28, 2015

Israel’s monetary committee left its policy interest rate unchanged at 0.1%, the level since a reduction of 15 basis points last February.  In each of four consecutive calendar years through 2014, the interest rate was reduced three times, bringing such to 0.25% from 3.25% at the end of 2010.  A statement released by the central bank today noted

  • A larger 12-month decline in consumer prices of 0.9% in November from 0.7% in October.
  • A rise of inflation through the floor of the 1-3% target is unlikely before early 2017.
  • Short-term expected inflation continues to slip, but medium- to longer-term inflation remains consistent with the target.
  • Risks have increased surrounding the likelihood of returning inflation to target within the timetable assumed.
  • Risks associated with the 2.8% projected Israeli growth rate in 2016 are “high.”
  • An effective 7% year-to-date appreciation of the shekel will depress growth and elongate the time it takes to raise inflation back into target.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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