BoI leaves rate unchanged, cuts growth forecast

Amir Yaron  photo: Rafi Kutz

The Bank of Israel Monetary Committee has left the interest rate unchanged at 0.25% and reduced the number of planned rate hikes.

The Bank of Israel Monetary Committee has left the interest rate unchanged at 0.25%. The Bank of Israel has also cut its 2019 growth forecast from 3.4% to 3.2% and says that growth will be 3.5% next year.

The Bank of Israel has also reduced the number of planned rate hikes in 2020 from three to two, so that by the end of 2020 the interest rate will be 1% instead of 1.25%, as previously planned.

This is Prof. Yaron Amir's third meeting as Governor and head of the Monetary Committee in which the rate has remained unchanged. In November, at the last meeting prior to Amir taking office, the rate was raised from 0.1% to 0.25%, the first rate hike since 2011. 

On the economy, the Bank of Israel said, "In the fourth quarter of 2018, the economy grew at a rate in line with the long term pace, and indicators of activity support the assessment that the economy continued to grow at a solid pace in the first quarter as well. Labor market data show that it remains tight: the unemployment rate declined slightly, the employment rate stabilized at a record high level and the increase in wages continues. However, several indicators point to a possible moderation in the labor market."

On inflation, the Bank of Israel said that, "the inflation environment stabilized slightly above the lower bound of the target range. In the past 9 months, except for December 2018, the annual inflation rate has been 1.2% or higher. In the coming months, annual inflation is expected to be slightly above the lower bound of the target, and 1-year expectations and forecasts from the various sources hover near it. Medium-term and long-term forward expectations are slightly below the midpoint of the target."

On the shekel the Bank of Israel noted, "Since the last interest rate decision, the shekel strengthened by 1.2% in terms of the nominal effective exchange rate. If the appreciation continues, it could delay the inflation rate’s rise toward the midpoint of the target."

Published by Globes, Israel business news - en.globes.co.il - on April 8, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

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Amir Yaron  photo: Rafi Kutz
Amir Yaron photo: Rafi Kutz
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