The Bank of Israel will not be aggressive in raising interest rates once it starts tightening policy in the coming months since inflation is expected to remain under control, deputy governor Andrew Abir said on Tuesday, Trend reports with reference to Reuters.
The central bank on Monday held its benchmark rate at 0.1% for a 15th straight decision but signalled it would likely start raising rates soon amid robust economic growth. Last month, it said it would continue to conduct an accommodative monetary policy for a prolonged time.
Abir said the current rate was no longer appropriate for an economy that grew 8.1% in 2021 and rate hikes would be the next step after ending its quantitative easing (QE) programmes of government bond purchases late last year.
"Now, we are just moving into the next step of our monetary policy and signalling to the market that we will start the slow, gradual process of adjusting interest rates. And it will probably start in the next couple of months," Abir said in an interview with Reuters. "We are not talking about aggressive tightening."
Analysts say an increase could come as early as the next decision on April 11 and the rate would reach 1% in 2023.
Abir said it was too soon to pinpoint a date, especially given market uncertainty over tensions between Russia and Ukraine, but that the bank would not wait for long.
"We think the conditions will be ripe in the next few months to be able to start that process of raising the interest rate," he said.