Bank of Israel Interest Rate Benchmark Left at 2.0%

November 22, 2010

Israel’s central bank has implemented six 25-basis point rate hikes since August 2009, the latest being done in September of this year.  Today, as in October, the key rate was left at 2.0%, but this time the rate corridor in the credit window was doubled from plus or minus 0.25% to plus or minus 0.50%.  That step, like the six rate hikes done earlier, was portrayed part of a policy normalization process in a statement released today.  Israeli GDP expanded 3.8% annualized during the third quarter and by 4.3% from a year earlier.  CPI inflation of 2.5% now is seen likely to accelerate above target during 1H11 but to settle back into target thereafter.  Elevated house price inflation and slight above-target expected inflation are being monitored, but officials are also sensitive to the danger that with many central banks having still-low interest rates that tightening in Israel might exert excessive upward pressure on the shekel.

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



Comments are closed.