Israel keeps interest rate at ¼% as inflation falls in line with forecast

By Jennifer Chiou

New York, Dec. 29 – The Bank of Israel opted to keep its interest rate unchanged at ¼% for January, according to a press release.

The bank stated that the move is consistent with its monetary policy, which is intended to return the inflation rate to within the price stability target of 1% to 3% a year over the next 12 months and to support growth while maintaining financial stability.

The Consumer Price Index fell by 0.2% in November, compared to a drop of 0.3% in the prior month. The inflation rate as measured over the previous 12 months was negative 0.1%.

The declines in water and electricity prices that are planned for the beginning of January are expected to reduce the inflation rate by about 0.4% in a one-off effect, the release said. Against this background, inflation expectations derived from various sources remain low.

The shekel weakened by 2% against the dollar from Nov. 24 through Dec. 25 and appreciated by 0.2% in terms of the nominal effective exchange rate.

The divergent trends in the global economy continued this month, with strong growth in the United States and weakness in Europe, Japan and emerging economies, the bank said.

The decline in fuel prices is expected to support the global economy. However, as occurred in Russia, it is liable to negatively impact the economic stability of oil exporters, the bank noted.

The bank last cut the rate by 25 basis points in August and by 25 bps in July.

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