BOI Monetary Committee leaves interest rate unchanged 25 November 2019
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BOI Monetary Committee leaves interest rate unchanged

  • 11/25/2019
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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 BOI Spokesperson)

    The Monetary Committee decided on November 25, 2019 to keep the interest rate unchanged at 0.25 percent.​

    • The inflation environment remains low. Inflation in the past 12 months is 0.4 percent, and in the past two months, there has also been a decline in inflation excluding energy and fruits and vegetables, in view of the appreciation of the shekel and the slowdown in the increases of housing and food prices. One-year inflation expectations remained stable around the lower bound of the target range, and medium- and long-term expectations declined slightly.
    • Following the previous interest rate decision, the shekel weakened slightly and then strengthened again, so that in terms of the nominal effective exchange rate, it remained stable. However, since the beginning of the year, the shekel has strengthened by 8.9 percent, and the appreciation continues to make it difficult to return inflation to the target range.
    • Economic activity continues to grow at close to its potential rate, despite the negative global sentiment. Services exports are growing strongly, but the standstill in goods exports continues. The labor market remains tight. However, the political situation remains uncertain, and if the government is forced to operate on a continuance budget for a prolonged period, it may have a contractionary effect. 
    • Global economic activity continues to slow, and the deterioration in world trade continues. It appears that the process of deepening monetary accommodation by the major central banks has reached its limit at this stage. The signals sent out by the Federal Reserve indicate that the interest rate will remain at its current level unless there is a significant change in the state of the economy, and market assessments are that the ECB is not expected to change its interest rate in the next two years.
     
    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. Furthermore, the Committee is taking additional steps as necessary to make monetary policy 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 December 9, 2019. The next decision regarding the interest rate will be published at 16:00 on Thursday, January 9, 2020, followed by a press briefing by the Governor.



     
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