Israeli Policy Interest Rate Left at 1.5%

June 28, 2010

For a third straight month, the Bank of Israel decided not to implement a fifth rise of the short-term borrowing rate.  Such remains at 1.5%, after 25-basis points implemented last August, November, December and March.  A statement from the Bank of Israel repeats the view made in the April and May statements that present policy is expansionary and that policy is in the process of shifting to more normal levels.  However, growth of 3.6% annualized in 1Q10 was slower than 4.5% in the previous quarter, expected inflation has slipped, and actual inflation of 3.0% as of April is expected to decline toward the 2% mid-point of the central bank’s target band.  Global uncertainties have increased, an allusion to the European debt crisis, and the shekel fell more sharply against the dollar since the May policy meeting than it rose against the euro.  Analysts had been narrowly divided over whether the central bank rate would be kept steady or get nudged 25 basis points higher today.

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



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