Israel Monetary Policy April 2018


Israel: Bank of Israel holds rates unchanged in April on subdued inflation

April 16, 2018

On 16 April, the Bank of Israel decided to leave the interest rate unchanged at 0.10%, citing persistently low inflationary pressures. April’s decision was widely expected by market analysts, and the rate has now gone unchanged for 33 consecutive monetary policy meetings. It was last cut three years ago, in February 2015.

Few changes in the outlook were recorded in the weeks since officials last met in February, with the low inflation environment once again leaving the Bank with little room to maneuver. Although inflation was higher in both February and March than at the outset of the year, it remained well below the Bank’s 1.0%–3.0% target range. Moreover, the recorded rise was largely seasonal. Meanwhile, wage growth remained weak despite upbeat economic activity and the further tightening of the labor market.

In its third meeting of the year, the Bank again affirmed its commitment to maintaining loose monetary policy as it grapples with stubbornly low inflation. Furthermore, it signaled that its accommodative stance would persist until inflation returns to within the target range. Normalizing monetary policy over the short term could, however, be complicated by the continued appreciation of the shekel, which would almost certainly push officials to delay a first rate hike.

The Bank’s fourth monetary policy meeting of the year is scheduled for 29 May.

Expecting inflation to remain low this year, FocusEconomics Consensus Forecast panelists forecast the long-awaited tightening cycle to begin no earlier than the fourth quarter, at which point they expect inflation to have returned to within the Bank’s target range. That said, fewer than half of our panelists expect a first rate hike by the end of the year, with panelists currently seeing the interest rate ending 2018 at 0.21%. For 2019, our panelists see the interest rate ending the year at 0.75% as inflation moves within the Bank’s target range.


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Israel Monetary Policy Chart

Israel Monetary Policy May 2018

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

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