boi-monetary-committee-leaves-interest-rate-unchanged-9-january-2020
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BOI Monetary Committee leaves interest rate unchan

  • 1/9/2020
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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 so that the economy will continue to grow strongly.​​​
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    (Communicated by the BOI Spokesperson)

    The Monetary Committee decided on Thursday, January 9 2020 to keep the interest rate unchanged at 0.25 percent 

    • The inflation environment remains low. The November CPI was lower than expected, and inflation over the past 12 months is 0.3 percent. Inflation excluding energy and fruits and vegetables indicates a lower basic inflation rate than in previous months. In the coming months, inflation is expected to stay low, but most one-year expectations and forecasts remained near the lower bound of the target range.
    • Since the previous interest rate decision, the shekel has been relatively stable against the dollar, while most other currencies strengthened against the dollar. However, during 2019, the shekel strengthened by 8.3 percent in terms of the nominal effective exchange rate, a development that continues to make it difficult to return inflation to the target range.
    • Most indicators of economic activity point to continued solid growth in the fourth quarter, and the labor market remains tight. However, the interim budget is expected to have a markedly contractionary effect in the first half of 2020, and there is continuing uncertainty regarding budgetary policy thereafter. According to the Research Department’s staff forecast, growth is expected to slow somewhat in 2020.
    • Global economic activity continues to slow, but it seems that the risks of a significant deterioration have declined in view of progress in the trade negotiations between the US and China and the results of the UK elections. Inflation remains low, but it appears that the process of enhanced monetary accommodation by the major central banks has reached its limit at this stage.
    The Monetary Committee's assessment is that in view of the inflation environment in Israel, the monetary policies of major central banks, developments in the global economy and the risks to the domestic economy, and the development of the exchange rate, 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 January 23, 2020. The next decision regarding the interest rate will be published at 16:00 on Monday, February 24, 2020.

     
     

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