Israel Monetary Policy March 2016


Bank of Israel keeps policy rate on hold in April

At its 21 April monetary policy meeting, the Bank of Israel (BoI) decided to leave the policy rate unchanged at 0.10%. The decision met market expectations. This is the twelfth consecutive meeting in which the Bank has decided to keep the policy rate on hold.

Following an acceleration in the final quarter last year, the BoI commented that the economy likely decelerated slightly in the first quarter due to disappointing developments in the external sector. Moreover, recent surveys indicate a moderation in activity in the trade and service industries in Q1. However, the labor market remained robust and data from the Labor Force Survey show that the unemployment rate was at relatively-low levels in the first quarter. Regarding the currency, the Bank commented that the shekel had depreciated 2.1% against the USD since the previous meeting in March.

Regarding consumer prices, the Bank stated that the annual variation in consumer prices remains well below its inflation target range of 1.0% to 3.0% amid lower prices for fruit and vegetables and a decline in fuel prices. According to the BoI, this month, inflationary expectations were stable compared to the previous month. The Bank added that, “one-year inflation expectations remain below the target range, and expectations for the medium and long terms continue to be anchored within the target range.”

FocusEconomics Consensus Forecast panelists expect the base rate to end 2016 at 0.47%. For 2017, panelists see the policy rate ending the year at 1.29%.

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Israel Monetary Policy Chart

Israel Monetary Policy April 2016

Note: Policy Rate in %.
Source: Bank of Israel (BoI).

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