Israel Monetary Policy October 2019

Israel: Bank of Israel leaves policy rate stable in October, doubles down on dovish guidance

At its 7 October meeting, the Monetary Committee of the Bank of Israel (BoI) kept the key interest rate unchanged at 0.25%, in line with market expectations.

The Bank decided to remain in wait-and-see mode in October despite persistently low inflation—which was below the BoI’s 1.0%-3.0% target range for the third straight month in August, in part due to the stronger shekel—mounting external downside risks to growth and domestic political uncertainty. With economic activity in Israel still robust, this likely gave the Bank leeway to stay on the sidelines and observe the evolution of inflation over the next few months before making any potential policy changes.

The Central Bank reinforced its dovish guidance in October. All mention of rate hikes was dropped, with the BoI stating that “it will be necessary to leave the interest rate at its current level for a prolonged period, or to reduce it” in order to ensure inflation stabilizes at the target midpoint.

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