Bank of Israel Raised Key Policy Rate To 0.75% from 0.50%

August 25, 2009

The Bank of Israel unexpectedly raised its key rate nineteen days after ending its program of bond buying. A statement from monetary officials notes that policy remains expansive and speaks about a desire to balance the need to contain inflation, which is expected to hover around the target ceiling, against a mandate to promote growth with unemployment poised to climb further.  As one of the first banks to reverse direction, it will not be lost on analysts that the Bank of Israel acted before the jobless rate had crested and so several other central banks may do that as well. There had been eight rate cuts by the Bank of Israel between October and March, reducing such from a peak of 4.25% to a trough of 0.50%.  Although industrial production in June was still 8.6% less than a year earlier, real GDP last quarter expanded 1.0% at an annualized rate and 0.1% from 2Q08.  Consumer prices rose 3.5% in the year to July.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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