Bank of Israel Interest Rate Benchmark Stays at 2.5%

May 28, 2012

The Bank of Israel left its key interest rate unchanged.  From a post-Great Recession low of 0.5% through August 2009, the benchmark was lifted by 75 basis points over the rest of 2009, 75 bps in 2010, and 125 bps in four steps during the first half of 2011, but three cuts of 25 bps each were subsequently administered, the last of which was announced on January 23, 2012.  Considerations behind the decision to retain 2.5% for next month were

  • intensifying euro-driven uncertainty in the global environment,
  • In-target inflation lately. The CPI rose 2.1% between April 2011 and April 2012 versus a target for this year of 1-3%.
  • Significantly lower oil price.
  • Economic growth has been tracking along the path officials expect.  They forecast GDP rising 3.1% this year.
  • Low central bank rates are being maintained elsewhere, and more easing cannot be ruled out.

The next interest rate announcement is scheduled for June 25.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.