Israel: Bank of Israel holds policy rate steady in July
July 10, 2017
The Bank of Israel (BoI) left the policy rate unchanged at 0.10% at its 10 July meeting. The decision did not come as a surprise to market analysts. Since February 2015 the rate has been at its current level in an attempt to shore up inflation.
The decision came at a time when inflation has been moving towards the Bank’s target of 1.0%-3.0% since the start of the year. However, the Bank judged current inflationary pressures to be low, due to the impact of the appreciation of the shekel and increased competition in the economy. These factors are counteracting the effects of increased nominal wages, a strong domestic economic environment and greater global inflationary pressures on prices. Additionally, the Bank expects inflation to ease in the coming months on the back of lower prices for water and fuel and after-school childcare. Against this backdrop, the Bank decided to leave the rate unchanged in a bid to return the inflation rate to its intended range.
Going forward, the Bank of Israel reiterated its commitment to maintaining an accommodative monetary stance as long as inflation is not entrenched within the target range. FocusEconomics panelists are expecting inflation to remain below target during the remainder of the year and hence they also foresee the policy rate being left unchanged until next year. Our panel expects a tightening of monetary policy next year once inflation returns to its target range.
The next monetary policy meeting is scheduled for 29 August.
Author: Jan Lammersen, Economist