Bank of Israel keeps interest rate at historic low

The Bank of Israel Monetary Committee, headed by Governor Karnit Flug, has kept the interest rate for December unchanged at its historic low of 0.1%. The interest rate has been unchanged since March 2015, and the Bank of Israel’s Research Department does not expect a rate hike until the third quarter of 2018 because of low inflation.

“In recent months, there has been a slight increase in the inflation environment, though it remains below the target [of between 1% and 3%],” the central bank said. “Annual inflation increased, and short-term expectations rose slightly. Long-term expectations are anchored within the target range.”

The Bank of Israel added: “The economy continues to expand at a pace that is consistent with its potential growth. However, the first estimate of third-quarter National Accounts shows a halt in the recovery of exports, due to a decline in goods exports, while private consumption returned to being the main component of growth. All indicators from the labor market continue to point toward its strength and to show that it hovers around full employment. “

Regarding the shekel, the central bank said: “The exchange rate has stabilized since the last monetary discussion. In the past 12 months, the shekel has appreciated by 5% in effective exchange-rate terms.”

Regarding housing prices, the Bank of Israel said: “Housing-market data continue to indicate some slowdown in activity, with the continued increase in home prices at a relatively moderate rate.”