Economic news

Bank of Israel MPC Voted 5-0 to Hold Rates, may Hike more -Minutes

JERUSALEM, Sept 18 (Reuters) - All five members of the Bank of Israel's monetary policy committee voted on Sept. 4 to leave the benchmark interest rate at 4.75% but were ready to resume hikes if inflation remained high, minutes of the discussion showed on Monday.

The central bank's move to hold rates this month was the second in a row and followed 10 straight rate increases that had taken the policy rate from 0.1% in April of 2022.

It noted that economic activity in Israel was at a high level, and accompanied by a tight labour market, although there was some moderation in a number of indicators.

Inflation, the bank said, was broad and remained high but appears to be slowing. Helped by a negative rate in August 2022, the inflation rate fell to 3.3% in July 2023 but data published on Friday showed the rate jumped to a higher than expected 4.1% in August - well above its 1-3% annual target range.

The MPC "decided to leave the interest rate unchanged, but sees a real possibility of having to raise the interest rate in future decisions, if the inflation environment does not continue to moderate as expected," it said.

Policymakers noted that even though rates were "restrictive" and working to moderate inflation, the shekel's depreciation was a key factor keeping inflation lofty. Since the beginning of the year, the shekel has weakened nearly 9% versus the dollar, largely due to investor fears surrounding the government's plan to rein in the Supreme Court's powers.

The central bank has estimated the weaker shekel has contributed some 1.5 points to the inflation rate.

Bank of Israel Governor Amir Yaron told Reuters on Sept. 5 that while a 4.75% rate should be enough to bring inflation back to its target, "if we will deem that developments have been less favourable in terms of bringing inflation down, be it (economic) activity much stronger or inflation much more sticky than we expected, we will not hesitate to raise interest rates."

Israel's economy is forecast to grow 3% in 2023. The MPC said it sees moderation of growth in several areas while there were signs of a moderating jobs market.

Reporting by Steven Scheer Editing by Bernadette Baum

Source: Reuters

To leave a comment you must or Join us

More news

Back to economic news list

By visiting our website and services, you agree to the conditions of use of cookies. Learn more
I agree