The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has decided to leave the interest rate unchanged at 4.75%, as forecast by economists. This is the second consecutive decision to keep the interest rate unchanged, after a run of 10 consecutive rate hikes made by the Bank of Israel since April 2022.
In explaining its decision the Bank of Israel said, "Inflation is moderating, but is still above the target range. One-year inflation expectations and forecasts are within the target range, near the upper bound. Expectations derived from the capital market for the second year onward are within the target range."
Inflation in Israel, which peaked at 5.4%, fell sharply to 3.3% from 4.2% last month. However, Mizrahi Tefahot Bank chief market strategist Yonie Fanning expects annual inflation in Israel to rise to 4% after the Consumer Price Index figure for August is published due to technical reasons because of the big cut in fuel excise tax in August 2022.
The Bank of Israel said, "Economic activity in Israel is at a high level, and is accompanied by a tight labor market, although there is some moderation in a number of indicators. Inflation is broad and remains high. With that, in recent months inflation appears to be slowing. Therefore, the Monetary Committee decided to leave the interest rate unchanged, but sees a real possibility of having to raise the interest rate in future decisions, if the inflation environment does not continue to moderate as expected. The interest rate path will be determined in accordance with activity data and the development of inflation, in order to continue supporting the attainment of the policy goals."
Published by Globes, Israel business news - en.globes.co.il - on September 4, 2023.
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