​(Communicated by the Bank of Israel Spokesperson)

The Monetary Committee decided on January 10, 2018 to keep the interest rate unchanged at 0.1 percent.

Following are the main considerations underlying the decision:

• Since the previous interest rate decision, there has been no notable change in the inflation environment, which remains below the target range. Inflation is expected to continue being affected by price reductions initiated by the government, increased competition in the economy, and by the cumulative appreciation of the shekel to date. Wage increases in the economy, increases in energy prices, and the continued rise in rent prices, will support the return of inflation to the target range.
• Indicators of economic activity in the fourth quarter provide a basis for the assessment that the economy continued to grow in the fourth quarter at a pace that is in line with its potential growth rate. Labor market data continue to portray a high level of activity, and indicate a tight labor market. According to the Research Department’s staff forecast, the economy is expected to grow by about 3.5 percent per year in each of the next two years.
• Data on the global economy continue to indicate improvement, and growth forecasts have again been revised upward. However, inflation in most of the major economies continues to range below target. The US Federal Reserve is expected to continue raising the federal funds rate gradually during 2018. The ECB is maintaining its negative interest rate policy, but has begun reducing the volume of quantitative easing.
• The shekel strengthened in recent weeks, mainly against the dollar, in line with the global trend. In the past 12 months, the shekel has strengthened by about 5 percent in terms of the effective exchange rate.
• Housing market data continue to indicate some slowdown in activity, with a decline in the volume of transactions and a continued increase in home prices at a relatively moderate rate.

The Monetary Committee intends to maintain the accommodative policy as long as necessary in order to entrench the inflation environment within the target range. 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.

External links:

• Full BOI report