The Bank of Israel Monetary Committee decided at its meeting today to keep the central bank's interest rate for August at its historic low of 0.1%, as expected.
In its statement, the Monetary Committee listed as the reasons for its decision: "The rate of increase in the CPI over the preceding four months has been consistent with the inflation target. Short-term inflation expectations from various sources are around the lower bound of the target range. Expectations for medium and longer terms remain entrenched near the midpoint of the target range. However, the decline in energy prices, which resumed in the past month, and the appreciation of the shekel, may defer the return of the inflation rate to within the target range."
The Bank of Israel added, "Indicators of real economic activity that became available this month point to the economy continuing to grow at its moderate rate of recent years, led by private consumption and with a decline in exports. The second quarter Companies Survey supports this assessment. The Composite State of the Economy Index increased by 0.4% in June, and was positively affected by an increase in imports and in the job vacancy rate, but declines in goods exports and in industrial production were notably negative components. Labor market data continue to indicate a high level of employment and activity."
"Developments in China’s economy and the debt crisis in Greece," the Bank of Israel said, "despite their recent stabilization, continue to pose risks to a global economic recovery. Moderate recovery continues in the US and Europe. While in the US the probability increased of an interest rate rise beginning this year, in Europe the monetary expansion continues, and in several economies the interest rate was reduced."
On the shekel, the Bank of Israel said, "The shekel strengthened by 2.5% in terms of the nominal effective exchange rate this month, and has appreciated by 7.1% for the year to date, primarily as a result of the weakening of the euro. The appreciation, and the moderation in growth of world trade, weigh on the growth of exports and of the tradable sector."
Finally, on the real estate market, the Bank said, "Robust activity in the housing market, both on the supply side and on the demand side, continued this month, and was reflected in a record level of new mortgage volume, and an especially elevated level of new home sales. In the past 12 months, home prices have increased by 3.2%."
Published by Globes [online], Israel business news - www.globes-online.com - on July 27, 2015
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