Israel’s Tenth Rate Increase

May 23, 2011

Israel’s policy interest rate was increased today by 25 basis points to 3.25%.  It was cut to 0.5% during the Great Recession.  But way back in August 2009, the Bank of Israel implemented the first post-recession hike among all central banks.  There were two more increases in 2009 of 25 basis points each, three in 2010 of similar magnitude, and advances this year of 25 bps in January and February and 50 bps in March.  Today’s move brings the process of rate normalization to a cumulative increase of 275 basis points.  A released statement observed that expected inflation and 4.0% on-year actual CPI inflation both exceed the target range of 1-3% and observed continuing rapid GDP growth early this year that is pushing the economy closer to a state of full employment.  House price inflation has slowed a bit but remains high at 13.9%.  Exchange rate appreciation hasn’t generated enough disinflation to forestall the gradual tightening of monetary policy.  A paused uptrend in April lasted just one month.  Other emerging market central banks have also been raising interest rates, the statement noted.

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



Comments are closed.