Bank of Israel’s Monetary Policy to “Remain Accommodative for a Considerable Time”

June 27, 2016

Israel’s central bank rate has been at 0.1% since a 15-basis point cut in February 2015, which was preceded by 75 bps worth of easing in each of 2011, 2012, 2013, and 2014.  Nonetheless, current inflation of 0.5% is not expected to rise into target until around the middle of next year.  Projected Israeli growth was revised somewhat lower in response ot weaker 1Q16 expansion.  And thrust into this picture now comes the uncertain impact of the Brexit fallout.  Officials released a statement that addressed this new concern.

Uncertainty regarding the implications of the Brexit, and the continued decline of exports in recent months, strengthen the Monetary Committee’s assessment that in view of developments in the inflation environment, in growth in Israel and in the global economy, in the exchange rate, as well as in monetary policies of major central banks, monetary policy will remain accommodative for a considerable time. The Monetary Committee is of the opinion that, in view of the uncertainty generated due to the Brexit, the risks to achieving the inflation target and to growth have increased.

The Bank will use the tools available to it and will examine the need to use various tools to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system, and in this regard will continue to keep a close watch on developments in the asset markets, including the housing market.

Currency market intervention is one of the available tools.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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