​(Communicated by the Bank of Israel Spokesperson)

The decision to keep the interest rate for October 2016 unchanged at 0.1 percent is consistent with the Bank of Israel's monetary policy, which is intended to return the inflation rate to within the price stability target range of 1–3 percent a year, and to support growth while maintaining financial stability. The Monetary Committee continues to assess that in view of the inflation environment, and of developments in the global economy, in the exchange rate, as well as in monetary policies of major central banks, monetary policy will remain accommodative for a considerable time.
 
Following are the main considerations underlying the decision:
 
·     After the months of May through July, when the Consumer Price Index increased by a rate consistent with the seasonal path of the inflation target, the CPI for August was markedly lower than the path. Inflation as measured by the change in the CPI over the past 12 months continues to be negative, and short-term inflation expectations are still below the lower bound of the inflation target range. Medium-term and long-term expectations remain anchored within the target range.
·     The second estimate of National Accounts data for the second quarter was revised upward, and indicators that have become available to date point to the assessment that in the third quarter the economy continued to grow by a rate not less than that of recent years. The picture conveyed by labor market data remains positive, with growth in employment and in wages; a shortage of workers is becoming apparent in various industries.
·     The global economy continues to grow by a slow rate, and the growth rate of world trade continues to decline. Central banks continue to conduct very accommodative monetary policy. Assessments are that there is a relatively high probability that the US federal funds rate will be increased by the end of the year, though the path of the expected interest rate increase for the coming years is lower than previously assessed.
·     From the monetary policy discussion on August 28, 2016, through September 23, 2016, the shekel strengthened by 0.2 percent against the dollar. In terms of the nominal effective exchange rate, the shekel appreciated by 0.3 percent, and has appreciated by 4.9 percent over the past 12 months. The level of the effective exchange rate continues to weigh on the growth of exports and of the tradable sector.
·     In the past two months home prices have stabilized. In the second quarter there was an increase in the number of building starts. Monthly mortgage volume is stabilizing, with a continued increase in mortgage interest rates.
 
The Monetary Committee is of the opinion that the risks to achieving the inflation target remain high. The Bank of Israel will continue to monitor developments in the Israeli and global economies and in financial markets. The Bank will use the tools available to it and will examine the need to use various tools to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system, and in this regard will continue to keep a close watch on developments in the asset markets, including the housing market.
 
The minutes of the monetary discussions prior to the interest rate decision for October 2016 will be published on October 10, 2016.

The decision regarding the interest rate for November 2016 will be published at 16:00 on Thursday, October 27, 2016.