Israel: Bank of Israel keeps policy rate on hold in February
February 22, 2016
At its 22 February monetary policy meeting, the Bank of Israel (BoI) decided to leave the policy rate unchanged at 0.10% as markets had expected. This is the tenth consecutive meeting in which the Bank has decided to keep the policy rate on hold.
The BoI commented that the economy had remained robust in the final quarter of 2015. The economy grew 2.7% on an annual basis and, according to the Bank, an increase in vehicle imports in Q4 was reflected in consumption, investment and import data. Latest data show that the economy remained resilient in the first quarter of 2016. In January, the Composite State of the Economy Index increased and the Consumer Confidence Index compiled by the Central Bureau of Statistics improved in the same month. The Central Bank also commented that the effect of security concerns on economic activity data remains moderate as shown in the high number of tourist arrivals.
In January, consumer prices fell 0.5% annually. The annual variation in consumer prices remains well below the Central Bank’s inflation target range of 1.0% to 3.0%. The Bank added that, “medium- and long-term expectations are anchored within the target range. Further initiated price reductions are expected to be reflected in the next few CPI readings as well. In contrast, wage increases in the economy are expected to support a return of the inflation rate to within the target range.”
Author: Dirina Mançellari, Senior Economist