The Bank of Israel Monetary Committee has announced that it has kept the interest rate unchanged at 4.5%, as expected. This is the eighth successive time that the Bank of Israel has left the interest rate unchanged, after cutting it from 4.75% in January 2024.
At the same time the Bank of Israel research department issued a revised forecast on growth. The research department GDP sees 0.6% growth in 2024 and 4% (up from 3.8%) in 2025, slightly higher than the previous forecast in October 2024. The research department sees GDP to growth of 4.5% in 2026.
The Bank of Israel sees the interest rate falling to 4.25% or even 4% by the end of 2025.
In explaining its decision, the Bank of Israel said that due to, The continuing war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity. The interest rate path will be determined in accordance with the convergence of inflation to its target, continued stability in the financial markets, economic activity, and fiscal policy."
On inflation, the Bank of Israel said, "The inflation rate remains stable at 3.4%. Tax changes, particularly the increase in VAT, along with continued supply constraints and excess demand, are expected to raise the inflation rate in the first half of the year, and inflation is expected to moderate to within the target range during the second half of the year."
The Bank of Israel research department predicts that inflation will fall to 2.6% by the end of 2025, down from its previous forecast of 2.8%.
Published by Globes, Israel business news - en.globes.co.il - on January 6, 2025.
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