Israeli Central Bank maintains interest rate at 0.1 pct in March

Israel Materials 27 February 2018 10:30 (UTC +04:00)

Israel's Central Bank, the Bank of Israel (BOI) announced Monday to keep its interest rate in March at the historic low of 0.1 percent, Xinhua reports.

The rate has been kept unchanged since March 2015.

The BOI said the inflation environment in Israel remains below the target, but there has been some increase in inflation expectations for the short and medium terms.

In the coming months, a temporary decline in the annual inflation rate is expected. The depreciation that occurred in the past month, to the extent it persists, as well as the wage increase in the economy, will support the return of inflation to the target range.

As for the economic activities, the BOI said they continued to expand in line with the potential growth rate.

The Central Bank said growth in 2017 has been more balanced. Against the background of the rapid growth in world trade, there was positive growth in goods exports, despite the appreciation, and services exports increased at a solid pace.

In contrast, investment in residential construction has declined for the past three quarters. Labor market data continued to indicate a high level of activities in a tight labor market.

Recent indicators supported the assessment that economic activities continued to grow in the first quarter of 2018, added the BOI.

With regard to the global economy, the BOI said that the improvement in the global economy is strengthening, and forecasts for growth and world trade continued to be revised upward. The correction in global equity markets has halted as of now.

On the Israeli currency new shekel, the BOI said that since the last interest rate decision, the currency has weakened by 3.1 percent in terms of the effective exchange rate, and by 1.6 percent against the dollar. In January this year, the BOI intervened in the foreign exchange market with the purchase of 1.8 billion U.S. dollars.

On the housing market, the BOI said that the data continued to indicate a slowdown of activity. There were declines in home prices in the last three months.

In conclusion, the BOI intended to maintain the accommodative policy as long as it is necessary in order to entrench the inflation environment within the target range. It 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.