Israel holds rate at 1% amid inflation in target range, stable growth

By Susanna Moon

Chicago, Dec. 23 - The Bank of Israel said it decided to hold the interest rate steady at 1%.

The move is consistent with the bank's monetary policy intended to entrench the inflation rate within the price stability target of 1% to 3% a year over the next 12 months and to support growth while maintaining financial stability, according to a bank notice.

Future rate decisions depend on developments in inflation, growth in Israel and in the global economy, the monetary policies of major central banks and developments in the exchange rate of the shekel, the bank said.

The Consumer Price Index fell by 0.4% for November, compared with forecasts for a drop of 0.2%, on average.

Inflation expectations from various sources rose slightly this month. Private forecasters' inflation projections for the next 12 CPI readings averaged 1.8%.

Inflation expectations for medium terms ticked up by 0.1% to 0.2%, while expectations for longer terms remained essentially unchanged and are slightly above the midpoint of the inflation target range, the bank noted.

Meanwhile, data that came out this month show the growth rate of the economy is stable, and there are even signs of some recovery in activity, including exports. The unemployment rate remains low, though there are conflicting trends in the labor market, the bank noted.

Also, the shekel has strengthened by 1.1% against the nominal effective exchange rate.

The bank last lowered the rate by 25 basis points to 1% from 1¼% in October.

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