Governor of the Bank of Israel Prof. Stanley Fischer raised the interest rate by 25 basis points this evening, to a level of 2.5%.
The move marked the second month in row that the interest rate was raised.
The rise was widely expected, as a Bloomberg survey showed that every analyst surveyed expected the move.
Last week, the Central Bureau of Statistics reported that Israel's GDP grew in the fourth quarter of 2010 at an annualized pace of 7.8%, and earlier it was reported that the Consumer Price Index (CPI) rose by an unexpectedly high 0.2% in January, bringing inflation over the past twelve months to 3.6%, above the 1-3% target range.
The Bank of Israel said that its decision was based on the fast economic growth which was driven by domestic demand; the inflation figures; and the housing market, saying "The steep increase in house prices continued; in the last twelve months they have risen by 17.5%. Although there was a drop in the volume of new mortgages in January, the volume of housing loans is still expanding rapidly."
Published by Globes [online], Israel business news - www.globes-online.com - on February 21, 2011
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