BoI keeps rate unchanged, cuts growth forecast

Bank of Israel Governor Amir Yaron credit: Eyal Izhar, Tali Bogdansky
Bank of Israel Governor Amir Yaron credit: Eyal Izhar, Tali Bogdansky

The Bank of Israel has announced that it has kept the interest rate unchanged at 4.5%, and cut the growth forecast due to uncertainty around the war.

The Bank of Israel Monetary Committee has announced that it has kept the interest rate unchanged at 4.5%, as expected. This is the fourth successive time that the Bank of Israel has left the interest rate unchanged, after cutting it from 4.75% in January. 

At the same time the Bank of Israel research department cut its GDP growth forecast for 2024 from 2% to 1.5% and its GDP growth forecast for 2025 from 5% to 4.2%.

The Bank of Israel stated, "The recovery of economic activity moderated in the second quarter of 2024. Supply constraints are making it difficult for activity to converge to the trend that characterized the economy prior to the war, and the extent of continued geopolitical uncertainty is reflected in the economy’s high risk premium."

On inflation the Bank of Israel raised its inflation forecast for 2024 from 2.8% to 3% and sees it dipping slightly to 2.8% in 2025.  The Bank of Israel said, "Inflation and one-year inflation expectations are around the upper bound of the target range (1%-3%), and expectations for the second year and forward are within the target range, in its upper portion. The moderation of inflation of the non-tradable components of the CPI was halted.

The Bank of Israel sees only one interest rate cut over the next year compared with three rate cuts in its previous forecast.

Published by Globes, Israel business news - en.globes.co.il - on July 8, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.

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