The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has raised the interest rate by 0.5% to 4.25%. This is the eighth rate hike made by the Bank of Israel since April 2022, and the third consecutive 0.5% hike. The Bank of Israel has taken a hawkish approach in its battle to curb rising inflation.
The decision by the Bank of Israel Monetary Committee to raise the rate by 0.5%, even though the US Federal Reserve only raised its rate at its most recent meeting by 0.25%, was made possible by Israel's continued high GDP growth, which allows room to maneuver. The Monetary Committee is concerned that inflation is taking root and it will become difficult to tame it.
The Bank of Israel said, "The Israeli economy is recording strong economic activity, accompanied by a tight labor market and an increase in the inflation environment. The Committee has therefore decided to continue the process of increasing the interest rate. The pace of raising the interest rate will be determined in accordance with activity data and the development of inflation, in order to continue supporting the attainment of the policy goals."
On inflation, the Bank of Israel said, "Inflation over the preceding 12 months is above the upper bound of the target, overshoots for a wide range of components, and is 5.4%. Inflation expectations for all terms are within the target range."
Published by Globes, Israel business news - en.globes.co.il - on February 20, 2023.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.