BOI Monetary Committee increases interest rate by 0.15 percentage points 26 November 2018
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BOI Monetary Committee increases interest rate by 0.15 percentage points to 0.25 percent

  • 11/26/2018
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    Even after the increase, monetary policy remains accommodative and will continue to support the attainment of policy targets. The Committee assesses that the rising path of the interest rate in the future will be gradual and cautious.
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    The Bank of Israel Monetary Committee decided today (Monday, November 26, 2018) to increase the interest rate by 0.15 percentage points to 0.25 percent.

    • After a continued rise in inflation since the beginning of 2018, the inflation rate is stabilizing slightly above the lower bound of the target range, and is expected to remain within the target in the coming months as well. One-year expectations and forecasts from the various sources hover around the level of one percent. Medium-term expectations remained entrenched within the target range. The rise in wages in the economy and the expansionary fiscal policy will support the continued entrenchment of inflation within the target. The main risk to this is the possibility of a sharp appreciation of the shekel.
    • An analysis of the data and of updated indicators of economic activity leads to the assessment that the economy is converging to its potential growth rate. In the second and third quarters, there was some slowdown in the economy’s growth rate, but current indicators of activity support the assessment that the economy is at full employment, and in particular, the tight labor market data indicate a high level of demand.
    • The US economy remains robust, though the risks due to the worsening “trade war” and the heightened political risk in Europe continue to weigh on momentum. The IMF revised its growth forecast downward for most countries and regions, and the moderation in world trade continues. Emerging economies are relatively stable. The gradual normalization process of monetary policy worldwide continues, but policy remains accommodative in most economies. In financial markets, there were marked declines in most equity indices.
    • Since the previous interest rate decision, the shekel weakened by 3.6 percent in terms of the nominal effective exchange rate and by 3.2 percent vis-à-vis the dollar.
    • Home prices stabilized in recent months. The number of transactions and mortgage volume appear to be stabilizing, with a slight increase in mortgage interest rates.
    • Even after an increase of the interest rate by 0.15 percentage points, monetary policy remains accommodative and will continue to support the attainment of policy targets. The Committee assesses that the rising path of the interest rate in the future will be gradual and cautious. 
    The Bank of Israel continues to monitor developments in inflation, the real economy, the financial markets, and the global economy, and will act to attain the monetary policy targets in accordance with such developments.


     
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