Bank of Israel: No Rate Change

February 25, 2013

Israel’s key policy interest rate has been 1.75% since a 25-basis point cut in December.  Such was the fourth cut of 2012 following ones in January, June and October, and the sixth overall since September 2011.  Each of those cuts was by 25 basis points.  From early 2009 through May 2011, the rate had been raised by 275 bps from a low of 0.5% to 3.25%.

Today’s policy statement reiterated the main points from the January statement after a similar decision not to cut further.  The main deterrent is house price inflation of almost 7%.  At the same time, growth has been soft, inflation of 1.5% lies below the target range midpoint of 2%, and expected inflation is contained.  The March policy statement is due March 24 and will embody new macroeconomic forecasts.  Forecasts released in December predicted inflation of 1.8% and growth of 3.8% this year.  The latest CPI and GDP readings are below those projections.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission. 



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