Israel: Bank of Israel leaves rates unchanged in November; forward guidance remains dovish
November 25, 2019
At its 25 November meeting, the Monetary Committee of the Bank of Israel (BoI) kept the key interest rate unchanged at 0.25%, confounding market expectations of a rate cut.
The Bank decided to stand pat despite inflation remaining below the BoI’s 1.0%–3.0% target range for the fifth straight month in October amid a strong shekel and low oil prices. Still-solid economic activity likely gave the Bank the leeway to stay on the sidelines, with the BoI opting for other measures to tame the shekel—the Bank purchased USD 314 million in foreign currency in October, the first major intervention this year.
The Central Bank remained dovish in its press release. The BoI warned of the potential impact of domestic political uncertainty on the economy, and highlighted that shekel strength continued to make it difficult to boost inflation. According to the Bank: “it will be necessary to leave the interest rate at its current level for a prolonged period or to reduce it” to ensure inflation stabilizes at the target midpoint. FocusEconomics panelists are broadly in agreement, with several seeing easing by end-2020.
Author: Oliver Reynolds, Economist