Increasing interest

Bank of Israel raises key rate to 0.25%

The Bank of Israel, in a surprise move, raised its benchmark interest rate to 0.25% from 0.1% on Monday for its first increase in more than seven years, as inflation remained within its target of 1% to 3%.

Just two of the 12 economists polled by Reuters had forecast a rate hike, while 10 others had expected no change at the meeting that was led by Deputy Bank of Israel governor Nadine Baudot-Trajtenberg, who is acting central bank chief.

Karnit Flug’s five-year term ended in mid-November and Amir Yaron is expected to be sworn in as governor next month.

“The committee was very aware that we are in a transition period, a period of changing governors... but like in all previous decisions, the committee members believed decisions must be made based solely on data and economic analyses,” Baudot-Trajtenberg said.

The last time rates were raised was in mid-2011, when Stanley Fischer was central bank chief.

The shekel rose 0.5% to 3.712 per dollar from its fixing of 3.729.

In deciding to raise short-term rates, the Bank of Israel cited inflation that is stabilizing within the target range, while the economy was growing at a solid pace.

“Even after an increase of the interest rate by 0.15 percentage points, monetary policy remains accommodative and will continue to support the attainment of policy targets,” the central bank said. “The committee assesses that the rising path of the interest rate in the future will be gradual and cautious.” (Reuters)