Israel Monetary Policy


Bank of Israel keeps policy rate unchanged at 0.10%

At its 27 July monetary policy meeting, the Bank of Israel (BoI) decided to keep the policy rate unchanged at 0.10%. The decision was in line with market expectations. This marks the fifth straight month in which the Bank has left the policy rate unchanged.

The BoI stated that recent economic data show that the moderate growth that has characterized the past two years continues, albeit with a decline in exports. According to the third estimate of Q1 national accounts data, GDP grew by 2.0% in annual terms. This figure was revised down from last month’s estimate of 2.1%, and the initial estimate of 2.5%. Growth was led by an increase in private consumption, which grew 7.9% annually according to the latest estimate. In addition, the Consumer Confidence Index compiled by the Central Bureau of Statistics increased in July, rebounding from last month’s decrease. Similarly, the number of tourists who arrived in Q2 increased over that of the previous quarter, indicating a slow recovery in the tourism sector.

In June, consumer prices fell 0.4% annually. The Bank attributed the annual drop to lower prices for tradable goods, which are still being affected by last year’s drop in energy prices. Conversely, prices for non-tradable items increased in June. Annual consumer price variation is likely to fall for several more months. Looking forward, the BoI added that, “the decline in energy prices that resumed in the past month, and the appreciation of the shekel, are liable to defer the return of the inflation rate to within the target range.”

FocusEconomics Consensus Forecast panelists expect the base rate to end 2015 at 0.68%. For 2016, panelists see the policy rate ending the year at 1.69%.

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Israel Monetary Policy Chart

Israel Monetary Policy July 2015

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

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