The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has raised the interest rate by 0.75% to 2.75%. This is the fifth rate hike made by the Bank of Israel since April, when it raised the rate from its historical low of 0.1% to 0.35%.
This is the second successive hawkish 0.75% hike, after the Bank of Israel raised the rate in late August. The Israeli central bank is striving to tackle inflation, which has been running at 4.5% over the past 12 months in Israel, well below the 8% in the US and more than 10% in many European countries, but still worrying.
The Bank of Israel said, “The Israeli economy is recording strong economic activity, accompanied by a tight labor market and an increase in the inflation environment. The Committee has therefore decided to continue the process of increasing the interest rate. The pace of raising the interest rate will be determined in accordance with activity data and the development of inflation, in order to continue supporting the attainment of the policy goals.”
The Bank of Israel Research Department revised its GDP growth forecast upwards by 1% to 6% in 2022, and lowered it by 0.5% to 3% in 2023. The Bank of Israel expects the inflation rate to be 4.6% in 2022, up 0.1% from its previous forecast in April, and to decline to 2.5% in 2023.
The Bank of Israel Research Department sees the interest rate at 3.5% in the third quarter of 2023.
Published by Globes, Israel business news – en.globes.co.il – on October 3, 2022.
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