Israel lifts interest rate by 25 bps to 1% to keep inflation in check

By Richard Connell

New York, Nov. 23 - The Bank of Israel increased its benchmark interest rate by 25 basis points to 1% at its meeting on Monday, according to a news release issued by the bank.

The bank pointed out that inflation as measured by the CPI rose by 0.2% in October, having increased by 2.9% over the last 12 months and 3.6% since the beginning of 2009.

Looking forward, the bank forecast that inflation would be above the inflation target in the coming months but should remain at the upper end of the inflation target range through 2010.

The bank also looked at data which showed a recovery in the economy of Israel, including a GDP growth rate of 2.2%, as well as sharp increases in private consumption, fixed investment and exports.

The bank opted to increase the interest rate to 1% in order to support further economic activity as well as to place inflation within the target range.

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