Israel Monetary Policy July 2016


Israel: Bank of Israel keeps policy rate unchanged in July

July 25, 2016

At its 25 July monetary policy meeting, the Bank of Israel (BoI) decided to leave the policy rate unchanged at 0.10%, in line with market expectations. This was the fifteenth consecutive meeting at which the Bank decided to keep the policy rate on hold.

The BoI confirmed that although a third estimate had revised upward GDP growth figures in Q1, the economy had in fact decelerated over the previous quarter. However, the Bank expects economic growth to pick up momentum in the second quarter. Recent survey-based data suggest that growth will be within a 2.5%–3.0% range, with strong expansion expected to have taken place mainly in the trade, construction, transport and communication sectors. Regarding foreign trade, the Bank stated that goods imports had increased in the second quarter, while exports had declined slightly. The labor market also remained robust and the latest Labor Force Survey showed that the unemployment rate had decreased further in June, which suggests that the economy is approaching full employment. The monetary authority also commented that the currency had strengthened 1.2% against the U.S. dollar since the previous meeting on 26 June.

Regarding price developments, the Bank noted that consumer prices had increased over three consecutive months since April, but inflation 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, though it added that the uncertainty regarding the ramifications of the Brexit process could still pose a risk to the inflation target as well as to economic growth.

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:, Economist

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Israel Monetary Policy Chart

Israel Monetary Policy July 2016 2

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

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