Israel Monetary Policy July 2019

Israel: Bank of Israel leaves policy rate unchanged in July

At its 8 July meeting, the Monetary Committee of the Bank of Israel (BoI) kept the key interest rate unchanged at 0.25%.

The Bank’s decision to stay put was likely driven by external downside risks to growth, domestic political uncertainty and the appreciation of the shekel since the start of 2019. Moreover, although inflation rose in May, and has tended to surprise the Bank on the upside so far this year, it remains in the lower half of the Bank’s 1.0%–3.0% target range.

Despite more dovish stances by other global central banks and an uncertain global economic panorama, the Committee reiterated its guidance that future tightening would be “gradual and cautious” in order to ensure inflation stabilizes around the midpoint of the target range. On balance, a small majority of our panelists continue to see a rate hike later this year in order to build policy space. However, several panelists see rates unchanged against a backdrop of mild inflation.

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