The Bank of Israel Monetary Committee headed by Governor Karnit Flug is keeping its lending rate at the historic low of 0.1%. The rate has been unchanged since March 2015.
In explaining today's decision, the Monetary Committee stated that "since the previous interest rate decision, there has been no notable change in the inflation environment, which remains below the target range. Inflation is expected to continue being affected by price reductions initiated by the government, increased competition in the economy, and by the cumulative appreciation of the shekel to date. Wage increases in the economy, increases in energy prices, and the continued rise in rent prices, will support the return of inflation to the target range."
The Bank of Israel Monetary Committee added, "Indicators of economic activity in the fourth quarter provide a basis for the assessment that the economy continued to grow in the fourth quarter at a pace that is in line with its potential growth rate. Labor market data continue to portray a high level of activity, and indicate a tight labor market. According to the Research Department’s staff forecast, the economy is expected to grow by about 3.5% per year in each of the next two years."
"Data on the global economy continue to indicate improvement, and growth forecasts have again been revised upward. However, inflation in most of the major economies continues to range below target. The US Federal Reserve is expected to continue raising the federal funds rate gradually during 2018. The ECB is maintaining its negative interest rate policy, but has begun reducing the volume of quantitative easing."
"The shekel strengthened in recent weeks, mainly against the dollar, in line with the global trend. In the past 12 months, the shekel has strengthened by about 5% in terms of the effective exchange rate."
"Housing market data continue to indicate some slowdown in activity, with a decline in the volume of transactions and a continued increase in home prices at a relatively moderate rate."
Published by Globes [online], Israel business news - www.globes-online.com - on January 10, 2018
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