BOI Monetary Committee keeps interest rate unchanged 7 October 2019
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BOI Monetary Committee keeps interest rate unchanged

  • 10/7/2019
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    The Committee assesses that, based on various economic indicators, it will be necessary to support a process at the end of which inflation will stabilize around the midpoint of the target range and so that the economy will continue to grow strongly.
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    Copyright: Bank of Israel
     
     
    ​​(Communicated by the Bank of Israel Spokesperson)

    • The inflation environment remains low. Inflation in the past 12 months was 0.6 percent while inflation excluding energy and fruit and vegetables has been stable in the range of 0.9–1.1 percent since the beginning of the year. Most of the negative contribution to the CPI in recent months came from the components that are traditionally volatile, but also from the cumulative appreciation of the shekel since the beginning of the year. Annual inflation is expected to decline in the coming months, and to return to near the lower bound of the target range within a year. Long-term expectations are anchored near the midpoint of the target range.
    • Since the previous interest rate decision, the shekel has strengthened by 1.2 percent in terms of the nominal effective exchange rate, and by 9.1 percent since the beginning of the year. The appreciation is making it more difficult to return inflation to the target range.
    • The risks to the global economy have increased, mainly due to the "trade war" and uncertainty regarding Brexit. Growth forecasts were revised downward, and the major central banks adopted monetary accommodation measures.
    • Economic activity continues to grow at near its potential rate, and so far it seems that it is not being adversely affected by the negative global sentiment or by the political situation in Israel. However, uncertainty regarding the measures that the government will take to reduce the deficit increases the uncertainty regarding developments in the domestic economy. Most of the indicators show that in the third quarter, the economy continued to grow at near the potential rate. Exports are increasing solidly, but the Business Tendency Survey indicates some increase in the rate of companies reporting serious constraints in export profitability, following a decline in this rate during 2018. The labor market remains tight.

    The Monetary Committee's assessment is that in view of the inflation environment in Israel, the monetary policies of major central banks, the slowing in the global economy, and the continued appreciation of the shekel, it will be necessary to leave the interest rate at its current level for a prolonged period, or to reduce it in order to support a process at the end of which inflation will stabilize around the midpoint of the target range, and so that the economy will continue to grow strongly. Moreover, if necessary, the Committee will take additional steps to make monetary policy even more accommodative. The Bank of Israel continues to monitor developments in inflation, the real economy, fiscal policy, the financial markets, and the global economy, and will act to attain the monetary policy targets in accordance with such developments.

    The minutes of the monetary discussions prior to this interest rate decision will be published on October 22, 2019. The next decision regarding the interest rate will be published at 16:00 on Monday, November 25, 2019.​
     
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