Israel Monetary Policy


Israel: Bank of Israel keeps policy rate on hold at 0.10% in June

June 22, 2015

At its 22 June monetary policy meeting, the Bank of Israel (BoI) decided to keep the policy rate unchanged at 0.10%. The decision met market expectations. This is the third consecutive meeting in which the Bank has decided not to change the policy rate.

The BoI commented that economic data from the first five months indicate that the economy is growing at a moderate pace. According to revised data, in the first quarter, GDP grew 2.1% over the fourth quarter of last year in seasonally-adjusted terms. The figure was down from the 2.5% growth reported in the preliminary estimate. The downward revision came on the back of unexpectedly weak exports. In May, the Composite State of the Economy Index rose 0.3%, broadly reflecting an increase in consumer goods imports. Regarding the labor market, the Bank added that the latest data for May don’t indicate major changes compared to the previous month as the unemployment rate remained broadly stable. Nevertheless, the job vacancy rate increased slightly compared to April.

In May, consumer prices fell 0.4% annually, which was up from the 1.0% drop seen in the previous month. Despite the softer decline, the annual variation in consumer prices remains well below the Central Bank’s inflation target of 1.0% to 3.0%. According to the BoI, “the inflation environment is beginning to converge to within the target range.” The Bank went on to conclude that, “the path of the interest rate in the future depends on developments in the inflation environment, growth in Israel and in the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel.”

FocusEconomics Consensus Forecast panelists expect the base rate to end 2015 at 0.68%. For 2016, panelists see the policy rate ending the year at 1.69%.

Author:, Senior Economist

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Israel Monetary Policy Chart

Israel Monetary Policy June 2015

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

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