The Governor of the Bank of Israel Prof. Stanley Fischer has kept the interest rate for July unchanged at 3.25%, after raising it by 25 basis points last month. The decision was in line with the unanimous expectations by analysts.
In explaining its decision, the Bank of Israel cited the low interest rates in the major advanced economies and that they will likely to remain so over the next few months. Although some central banks raised their interest rates because of rising inflation in their countries, concern of a slowdown in US growth and the worsening of debt risks in Europe led to expectations of a slowdown in the pace of interest rate increases in other markets.
The Bank of Israel cautioned that inflation over the preceding 12 months continued to be high, at 4.1%, but that capital market 12-month inflation expectations have fallen to within the 3% inflation target ceiling. It also noted that home prices rose 15.3% in the past 12 months, but it expects that measures by the Bank of Israel and the Ministry of Finance should slow the rate of increase over the coming year.
While the Bank of Israel noted that economic indicators published this month point to continued economic expansion, which will continue in the second quarter, it cautioned about the implications for Israel's economy from the growing concerns over slower US economic growth and the worsening risks of debt problems.
Published by Globes [online], Israel business news - www.globes-online.com - on June 27, 2011
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