The Bank of Israel Monetary Committee announced that it kept the interest rate unchanged at 4.5%, as expected. This is the eighth time in a row that the Bank of Israel has left the interest rate unchanged, after reducing it from 4.75% in January 2024.
Meanwhile, the Bank of Israel’s research department issued revised growth forecasts. The research department forecasts GDP growth of 0.6% in 2024 and 4% (up from 3.8%) in 2025, slightly higher than the previous forecast in October 2024. The research department expects GDP growth of 4.5% in 2026.
The Bank of Israel expects the interest rate to fall to 4.25% or even 4% by the end of 2025.
Explaining its decision, the Bank of Israel said that due to the ongoing war, the Monetary Committee’s policy focuses on stabilizing markets and reducing uncertainty, along with stabilizing prices and supporting economic activity. The interest rate path will be determined according to the convergence of inflation to its target and the continued stability of financial markets, economic activity and fiscal policy.
Regarding inflation, the Bank of Israel said: “The inflation rate remains stable at 3.4%. Tax changes, especially the increase in value-added tax, along with continued supply restrictions and increased demand, are expected to raise the inflation rate in the first half of the year.” . Inflation is expected to stabilize within the target range during the second half of the year.”
The Bank of Israel’s research department expects inflation to fall to 2.6% by the end of 2025, down from its previous forecast of 2.8%.
Published by Globes, Israel Business News – en.globes.co.il – on January 6, 2025.
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