The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has left the interest rate unchanged at its historic low of 0.1%. This decision was expected after the lower than forecast October Consumer Price Index (CPI) rise of 0.1%, which reduced the pressure to raise the interest rate.
The Bank of Israel is satisfied with the relatively low inflationary environment compared with other countries and this has allowed the Monetary Committee to be more restrained about raising the interest rate. The expectation for a rate rise in Israel increased recently but were tempered by the publication of the October CPI figure, which means that inflation in Israel has been 2.3% over the past 12 months.
The Bank of Israel wrote, "To date, the only interest rate increases worldwide have been in countries where inflation deviated markedly from their targets, while inflation expectations in Israel are within our target range, and based on forecasts by the Bank of Israel Research Department and by forecasters, the inflation rate is expected to be lower in 12 months from now."
The Bank of Israel will stop buying government bonds in December, ending a program that began in 2020.
But the Bank of Israel added, "The Israeli economy’s process of recovery from the crisis continues. However, there are still challenges to economic activity. The Committee will therefore continue to conduct an accommodative monetary policy for a prolonged time, in accordance with the pace of growth, employment, and the path of inflation. This is in order to continue supporting the attainment of the policy targets and the recovery of the economy from the crisis, and to ensure the continued orderly functioning of the financial markets."
Published by Globes, Israel business news - en.globes.co.il - on November 22, 2021.
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