The Bank of Israel Monetary Committee, headed by Governor Dr. Karnit Flug, has kept the interest rate for August unchanged at 0.1%. The interest rate has been unchanged since it was cut to a historic low of 0.1% in March 2015.
the Bank of Israel cited the following considerations behind the decision."The rate of increase in home prices remains elevated, and both the level of transactions and the volume of mortgages remain high. The stock of homes for sale continues to increase."
It noted that the inflation environment continues to increase moderately and the Consumer Price Index has increased in the past three months. Short-term inflation expectations remained stable this month after increasing in previous months, but they are still below the lower bound of the inflation target range. Medium and long-term expectations remain anchored within the target range."
On growth in the Israeli economy the Bank of Israel observed, "Indicators of activity are in line with the assessment that the economy continues to grow at the rate that characterized recent years, led by private consumption and by industries focused on domestic activity. The slowdown in manufacturing is concentrated at high-technology industries, and a trend of increase in services exports is becoming apparent. The picture conveyed by labor market data continues to be positive, and there are signs that the economy is nearing full employment."
On the global economy, the Bank of Israel said, " In the weeks since the referendum in the UK, most financial markets stabilized. However, the uncertainty regarding the ramifications of the Brexit process is expected to remain high, and due to the Brexit decision, the IMF reduced its global growth forecast. In Europe, weakness is becoming apparent and risks to the economy are increasing, while in the US, indicators of activity, primarily labor market data, were strong. The monetary policy of major central banks is expected to remain very accommodative."
On the shekel, the Bank of Israel said, "From the monetary policy discussion on June 26, 2016, through July 22, 2016, the shekel strengthened by 1.2% against the dollar. In terms of the effective exchange rate, the shekel appreciated by 1.7%, similar to the rate of appreciation over the past 12 months. The level of the effective exchange rate continues to weigh on the growth of exports and of the tradable sector.
Published by Globes [online], Israel business news - www.globes-online.com - on July 25, 2016
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