Israel: Bank of Israel keeps policy rate on hold in October
October 26, 2015
At its 26 October monetary policy meeting, the Bank of Israel (BoI) decided to keep the policy rate unchanged at 0.10% as markets had expected. This is the sixth consecutive meeting in which the Bank has decided to keep the policy rate on hold.
The BoI commented that recent economic data point to a slight acceleration of the economy in the third quarter, thus confirming that the sharp decline seen in the second quarter was transitory. In Q3, growth was probably driven by robust private consumption, while exports most likely disappointed. The consumer confidence index compiled by the Central Bureau of Statistics and Bank Hapoalim recorded a deterioration in September, however, confidence is still relatively level compared to the readings tallied at the beginning of the year. Regarding the labor market, the Bank commented that the unemployment rate is low and that the job vacancy rate is high. According to the BoI, the service sector continues to be the main contributor to employment growth.
In September, consumer prices fell 0.5% annually, which was up from the 0.4% drop seen in the previous month. There was a significant decrease in the prices for education, culture and entertainment. 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.
Author: Dirina Mançellari, Senior Economist