The Bank of Israel published the minutes of the discussion of the Monetary Committee on the interest rate decision for March today. The central bank cut its key lending rate to a historical low of 0.1%. According to the minutes, four members of the Monetary Committee supported the decision, and one opposed it.
The minutes reveal that the main reason for the interest rate cut was the Bank of Israel's fear that quantitative easing in Europe was liable to cause appreciation of the shekel, which would harm Israel's exports and the economic recovery that had got underway here after Operation Protective Edge last summer.
On inflation, the Bank of Israel still believes that the low inflation rate in Israel is temporary, but it fears that it will remain low for longer than had been estimated.
The minutes also show that the Bank of Israel is indifferent to the renewed price rises in the real estate market, arguing that the reason for them is the collapse of the plan for zero rate VAT for first-time homebuyers. The bank stresses that the interest rate cut was necessary "despite the risks in the assets markets, particularly in the housing market and the corporate bond market."
Published by Globes [online], Israel business news - www.globes-online.com - on March 9, 2015
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