Israel Monetary Policy April 2018

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

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.

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