Tuesday, March 27, 2012

Bank of Israel Keeps Interest Rate on Hold at 2.50%

The Bank of Israel kept its benchmark interest on hold at 2.50%.  The Bank said "The decision to leave the interest rate for April 2012 unchanged at 2.5 percent is consistent with an interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability. The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, monetary policies of major central banks, and developments in the exchange rate of the shekel."

Previously the bank cut its monetary policy interest rate 25 basis points in January, November and September, leaving it unchanged at its June, July, and August meetings, and increasing the interest rate by 25 basis points to 3.25% at its May meeting this year.  Israel recorded annual inflation of 2.2% in December, 2.6% in November, 2.7% in October, 2.9% in September, 3.4% in August and July, 4.2% in June, 4.1% in May, and 4.0% in April and just inside the Bank's inflation target range of 1-3%.

The Bank expects the Israeli economy to grow about 3.1 percent this year and 3.5 percent next year.  The Israeli Shekel (ILS) has weakened about 6% against the US dollar over the past year, while the USDILS exchange rate last traded around 3.71.  The Bank next meets on the 23rd of April 2012.


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