Bank of Israel Interest Rate Left at 3.0%

April 25, 2011

The Bank of Israel paused monetary policy tightening this month, having already lifted its base rate by 100 basis points in three successive moves during the first quarter of 2011.  That advance, including a stepped-up 50-basis point hike in late March, exceeded the combined increases of 75 basis points each in calendar 2009 and 2010.  With a 25-bp increase from a low of 0.5%, the Bank of Israel way back in August 2009 was the very first central bank to tighten following the Great Recession.  This month’s central bank statement observes that expected inflation still exceeds its 3% target ceiling and that house price inflation surpasses 16%.  Projected Israeli GDP growth in 2011 was revised upward to 4.5% from 3.8%.   But the point is also made in the statement that recent appreciation of the shekel will be a disinflationary force.  Analysts had been pretty evenly divided about whether another rate hike today would follow last quarter’s escalated pace.  Officials left no doubt that the process of rate normalization is not over.  Today’s action is merely a pause.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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