The Monetary Committee of the Bank of Israel, headed by Governor Prof. Amir Yaron, decided to leave the interest rate unchanged at 4.75% for the first time in almost 18 months. Economists were divided on whether the price would remain unchanged or rise 0.25%. This decision ends a series of 10 consecutive increases in interest rates that the Bank of Israel has made since April 2022.
In explaining its decision, the Bank of Israel said inflation was declining. Inflation is moderating, but it remains high across a broad component of the CPI. The inflation rate over the past twelve months was 4.6%. Looking at the past six months, and even more so over the past three months, the pace of inflation has been decelerating in the prices of both tradable and non-tradable commodities.”
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The Bank of Israel added that “the inflation projections and forecasts for one year are within the target range, close to the upper limit. The projections drawn from the capital market for the second year onwards are within the target range.”
Along with the interest rate decision, the Bank of Israel raised its growth forecast for 2023 from 2.5% to 3% and lowered its inflation forecast for 2024 from 3.5% to 3%.
Inflation in 2023 is expected to reach 3.5%, down from the Bank of Israel’s previous forecast of 3.9% in April 2023, but still above the annual target range of between 1% and 3%.
The Bank of Israel expects the interest rate to be 4.75%-5% in the second quarter of 2024.
Published by Globes, Israel business news – en.globes.co.il – on July 10, 2023.
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