The Bank of Israel Monetary Committee headed by Governor Dr. Karnit Flug has kept the interest rate for January unchanged at 1%, in line with expectations. The Bank of Israel has kept the rate unchanged for the past two months after lowering the rate by 25 basis points in October.
The Bank of Israel said that the decision to keep the interest rate for January 2014 unchanged at 1% was due to the low inflationary environment and to support growth while maintaining financial stability. The Bank of Israel also cited a moderation in housing price rises and stability of the shekel.
The Bank of Israel observed that inflation is within the government's 1-3% target range, slightly below its midpoint. "The CPI reading for November surprised to the downside, and there was a moderate increase in expectations, from various sources, for inflation over the year ahead, though they all remain slightly below the midpoint of the inflation target."
the Bank of Israel added that Israel's growth rate is table and "Given the forecasts for recovery in the global economy and in global trade, the Research Department forecast indicates a moderate increase in the rate of growth (excluding the effect of natural gas production) next year."
On the shekel the Bank of Israel said, "After depreciating in the days before the previous monetary discussion, the shekel has strengthened since then by 1.1% against the nominal effective exchange rate. From a longer term perspective, after marked appreciation in the first half of the year, there has not been a trend of change in the effective exchange rate in recent months."
On housing prices, the Bank of Israel said, "Recent data from the housing market indicate a moderation in the rate of price increases, in the number of transactions, and in mortgages granted, alongside a decline in risk characteristics of mortgages and indications of increased supply. With that, it is not yet possible to point to a change in trend in the housing market."
Published by Globes [online], Israel business news - www.globes-online.com - on December 23, 2013
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