Bank of Israel Governor Prof. Stanley Fischer has kept the interest rate for February 2010 unchanged at 1.25%. The Bank of Israel raised interest rates last month and the month before that by 0.25% as well as last August when rates were at an historic low of 0.5%.
The rate hike is in line with market expectations and the analysts' consensus.
Explaining its decision the Bank of Israel said, "The decision to keep the interest rate for February unchanged at 1.25% is part of the gradual process of returning interest to a "normal" level; the process is intended to return inflation to within the target range and to contribute to the further recovery of economic activity, while supporting financial stability. The path of the interest rate will be determined in accordance with the inflation environment, the degree of firmness of growth, both global and in Israel, and the rate at which the major central banks increase their interest rates."
BoI added, "The December CPI was surprisingly low, with the main surprise being the decline in the owner-occupied-housing component. The forecast is that inflation during the first quarter of 2010 will also be low, due in part to the appreciation of the shekel. Inflation expectations for 2010, those derived from the capital market (2.7%) and the average of forecasters' expectations (2.3%), are both within the target range.
The statement continued, "Recent economic activity is continuing to develop positively. Against this background the Bank of Israel revised its growth forecast for 2010 upwards. Recently, however, uncertainty has risen with regard to the strength of the global recovery. Interest rates of the leading central banks around the world are very low, and are expected to remain so during the coming months."
The Bank of Israel concluded, "The Bank of Israel will continue to monitor Israeli and worldwide economic and financial developments, and will use the instruments available to it to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system."
Published by Globes [online], Israel business news - www.globes-online.com - on January 25, 2010
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