Monetary Committee keeps interest rate unchanged

Monetary Committee keeps interest rate unchanged

 

 

BOI Monetary Committee keeps interest rate unchanged

The Bank of Israel continues to monitor developments in inflation, the real economy, the financial markets, and the global economy, and will act to attain the monetary policy targets in accordance with such developments.

 

 

(Communicated by the BOI Spokesperson)

 

The Bank of Israel Monetary Committee decided today (Monday, 25 February 2019) to keep the interest rate unchanged at 0.25 percent.

 

  • The inflation environment remained near the lower bound of the target range. After the annual inflation rate declined below the target range in December, it returned above the lower bound in January, and in the coming months it is expected to hover near it. One-year expectations and forecasts from the various sources are around the lower bound of the target, while medium-term and long-term expectations increased slightly toward the midpoint of the target.
  • In the fourth quarter of 2018, the economy returned to a growth rate that is in line with the long term pace, after slowing in the second and third quarters of 2018. Growth was driven by private consumption, while investment in residential construction has continued to contract for several quarters and goods exports remain sluggish. In recent months, the unemployment rate increased slightly, and the job vacancy rate declined, but the labor market remains tight and supports the assessment that the economy is in a full employment environment. In particular, wages continue to rise, led by the business sector and across all industries.
  • The global macroeconomic picture continues to point to a decline in both the growth and inflation rates. The main risks include the slowdown in Europe, an escalation of the trade war, and Brexit. The IMF again revised its growth forecast downward for most regions, particularly Europe. Equity indices recovered, in light of the expected halt in the process of monetary contraction, and renewed optimism regarding US-China trade negotiations.
  • Since the last interest rate decision, the shekel strengthened by 2 percent in nominal effective exchange rate terms. If the appreciation continues, it could delay the inflation rate’s rise toward the midpoint of the target.

 

The Committee assesses that the rising path of the interest rate in the future will be gradual and cautious, in a manner that supports a process at the end of which inflation will stabilize around the midpoint of the target range, and that supports economic activity. The Bank of Israel continues to monitor developments in inflation, the real economy, the financial markets, and the global economy, and will act to attain the monetary policy targets in accordance with such developments.

 

The next decision regarding the interest rate will be published at 16:00 on Monday, April 8, 2019, following which the Governor will hold a press briefing.

 

 

See also: