The Bank of Israel Monetary Committee, headed by Governor Karnit Flug, has kept the interest rate for November unchanged at 0.1%. The rate has remained unchanged since the bank cut it to its historic low in March.
In citing its reasons for keeping the rate unchanged, the Bank of Israel said that, The inflation environment in the short term is affected by factors of a one-time nature. Short-term inflation expectations remained low this month, and are affected by these factors and by the recent stabilization of commodities prices. Medium-term (forward) expectations increased, and long-term (forward) expectations remained anchored near the midpoint of the target range."
The Bank of Israel added, "Indicators of real economic activity that became available this month support the assessment that the economy is growing at a moderate rate, led by private consumption, with continued weakness in exports. Labor market data indicate continued improvement in the labor market. Past experience shows that the wave of violence may have an effect on private consumption and on tourism, but that if it does not last long, the effect is expected to be moderate."
On global developments the Bank of Israel said, "The IMF lowered its global growth and global trade forecasts for 2016, mainly in view of developments in the emerging markets. The interest rate in a number of economies was lowered this month, and market assessments are that monetary policy in the major economies will remain accommodative, and that accommodation is even expected to increase in some of them."
On the shekel, the Bank of Israel said, "From the monetary policy discussion on September 21, 2015, through October 23, 2015, the shekel strengthened by about 1.1% in terms of the nominal effective exchange rate. Since the beginning of the year there has been an effective appreciation of 5.9%. The development of the exchange rate since the beginning of year is weighing on growth of exports and the tradable sector, and is delaying the return of inflation to within the target range."
Finally on home prices, the Bank of Israel said, "There was a decline in home prices this month, but over the past 12 months they have increased by 6.2%. There is a marked increase in the sale of new homes and in the stock of homes available for sale. The volume of new mortgages taken out remains high."
Published by Globes [online], Israel business news - www.globes-online.com - on October 26, 2015
© Copyright of Globes Publisher Itonut (1983) Ltd. 2015