Israel: Bank of Israel leaves policy rate unchanged in November
November 28, 2016
At its 28 November 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 economy recorded seasonally-adjusted year-on-year growth of 3.2% in the third quarter of 2016, thanks to strong fixed investment and consumption growth, which counteracted a sharp contraction in exports. The unemployment rate remained low at 3.9% in October. Moreover, real wages, which have been on an upward trend in the past two years, increased substantially between June and August. The foreign exchange market saw little change, with the shekel depreciating 0.8% relative to the U.S. dollar compared to the previous month.
Regarding price developments, the Bank stated that consumer prices increased by 0.2% in October compared to September, and the rise was driven by an increase in food prices, while housing prices declined slightly. Consumer prices over the same month last year fell by 0.3%, remaining outside the Bank’s target band of 1.0%-3.0%. The Bank expects inflation over the next 12 months to reach 0.3% and to rise thereafter towards the target band. The Bol has revised up its medium- and long-term inflation forecasts due to a possible depreciation of the shekel resulting from the outcome of the U.S. election.
Author: Oliver Reynolds, Economist