Israel Monetary Policy


Israel: Bank of Israel keeps policy rate unchanged again in September

September 24, 2015

At its 24 September 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 fifth 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. Exports, which tallied a steep contraction in Q2, likely recovered in Q3. Moreover, the current account is expected to have incurred a surplus in the third quarter mainly reflecting lower oil prices and higher exports prices. In August, the consumer confidence index compiled by the Central Bureau of Statistics and Bank Hapoalim recorded an improvement over the previous month and now stands at a relatively high level compared to the readings tallied at the beginning of 2015. 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 August, consumer prices fell 0.4% annually, which was up from the 0.3% drop seen in the previous month. There was a significant decrease in the prices of fruit and vegetables due to a seasonal effect, which compensated for the seasonal increase in prices for clothing and footwear. The annual variation in consumer prices remains well below the Central Bank’s inflation target of 1.0% to 3.0%. The Bank added that, “the decline in energy and commodity prices that resumed in the past two months is expected to delay the return of the inflation rate to within the target range.”

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 September 2015

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

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