Israel: Bank of Israel keeps policy rate on hold in November
November 23, 2015
At its 23 November 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 seventh consecutive meeting in which the Bank has decided to keep the policy rate on hold.
The BoI commented that the economy had improved significantly in the third quarter and that GDP expanded 2.5% on a sequential basis. Exports expanded in Q3, following two consecutive contractions, and private consumption continued to grow at a respectable rate. More recent data show that the consumer confidence index compiled by the Central Bureau of Statistics and Bank Hapoalim recorded a slight deceleration in October, however, confidence is still at relatively-high levels compared to the readings tallied at the beginning of the year. Regarding the labor market, the Bank commented that the unemployment rate is low that that the job vacancy rate is high. According to the BoI, the service sector continues to be the main contributor to employment growth.
In October, consumer prices fell 0.7% annually, which was down from the 0.5% drop seen in the previous month. As a result, 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 it expects consumer prices to drop further in the months ahead due to the effect of the VAT reduction and the decline in fuel prices. Looking forward, similar to the previous meeting, the Bank commented that, “monetary policy will remain accommodative for a considerable time.”
Author: Dirina Mançellari, Senior Economist