Israel: Bank of Israel cuts policy rate to 0.10%
February 23, 2015
At its 23 February monetary policy meeting, the Bank of Israel (BoI) decided to cut the policy rate by 15 basis points from 0.25% to 0.10%. The decision was taken in order to bring the inflation rate within the target range. This is the first cut the Bank has made to the policy rate after five consecutive meetings in which it was left unchanged at 0.25%.
The Central Bank commented that an acceleration in economic activity was supported by an improvement in domestic demand in the last quarter of 2014. In addition, the labor market showed positive signs in the same quarter: the unemployment rate declined to a historic low and real wages increased compared to the previous quarter. The Bank added that, in February, the currency continued to appreciate, strengthening by 2.6% against the USD.
In January, consumer prices fell 0.9% over the same month last year against the backdrop of a decline in prices for energy and water as well as seasonal drops in prices for clothing and footwear. The Monetary Committee is of the opinion that, due to the drop in annual consumer prices and the currency’s increased rate of appreciation, “reducing the interest rate to 0.1 percent is the most appropriate step at this time in order to support achieving the policy targets.”
Author: Dirina Mançellari, Senior Economist