Israel Monetary Policy March 2016


Bank of Israel leaves policy rate unchanged again in March

At its 28 March 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 eleventh consecutive meeting in which the Bank has decided to keep the policy rate on hold.

The BoI commented that the economy will likely decelerate slightly in the first quarter of this year following the acceleration in the last quarter of 2015. In February, the Composite State of the Economy Index decelerated and the PMI index fell into contraction territory, thus indicating deteriorating business activity. Moreover, in the same month, exports contracted on an annual basis. The Central Bank also commented that the effect of security concerns on the economy remains moderate and that in February tourist arrivals increased 9.7% over the previous month.

Regarding consumer prices, the Bank commented that the annual variation in consumer prices remains well below its inflation target range of 1.0% to 3.0%. The BoI added that, “this month there was a relatively sharp increase in inflation expectations, against the background of the turnaround in oil prices,” and went on to say that, as a result, “the annual inflation rate is expected to enter the target range toward the middle of 2017.”

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 March 2016 0

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

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