Israel Monetary Policy August 2016


Israel: Bank of Israel keeps policy rate unchanged in August

August 29, 2016

At its 29 August monetary policy meeting, the Bank of Israel (BoI) decided to leave the policy rate unchanged at 0.10%, in line with market expectations. The rate has been held at 0.10% since February 2015.

The BoI stated that the first estimate for second quarter growth was a positive surprise as GDP accelerated strongly over the first quarter. The main driver behind this number was soaring private consumption, supported by increasing wages and lower unemployment. However, the Bank urged caution since it is uncertain if this healthy growth rate will be sustained going forward. Regarding foreign trade, the Bank stated that exports were still lagging behind global trade activity.

The labor market also remained robust. The Labor Force Survey from July showed that the unemployment rate reached a multi-year low in July and the job vacancy rate increased to a record high.

The Monetary Authority commented that the currency had strengthened 2.2% against the U.S. dollar since the previous meeting on 24 July.

Regarding price developments, the Bank noted that consumer prices had increased in July but inflation that is still well below the lower end of the 1–3% target. Similarly, the Bank noted that there was no significant change in medium- and long-term inflation expectations. The next monetary policy meeting is scheduled for 29 September.

FocusEconomics Consensus Forecast panelists expect the monetary policy rate to end 2016 at 0.11%. For 2017, panelists see the policy rate ending the year at 0.74%.

Author: Marlène Rump, Senior Data Analyst

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Israel Monetary Policy Chart

Israel Monetary Policy August 2016 0

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

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