Surprise Decision by Bank of Israel Not to Cut Lending Rate an 11th Time Just Yet

May 26, 2014

Israel’s central bank rate will stay at 0.75% for the time being.  It was cut by 50 bps in 2011, 100 bps in 2012, 75 bps in 2013 and, most recently, to 0.75% from 1.0% this past February.  All the prior reductions had been by 25 basis points, and lower than expected CPI inflation and moderating economic growth seemed to set the stage for the eleventh reduction of this streak.  Consumer prices rose only 0.1% on month, much less than forecast, in April, trimming the 12-month rate of increase to 1.0%, which happens to be the floor of the Bank of Israel’s target of 1-3%.  A statement released after the meeting predicts that inflation will likely dip under 1% in the short term but return to target later.  Unemployment has recently fallen, and the shekel has been more stable than before.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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