The Monetary Committee of the Bank of Israel decided on Monday not to raise the interest rate, leaving it unchanged at 4.75% following 10 consecutive hikes.
According to a statement released by the central bank, inflation, though still high over a wide range of CPI components, is moderating. Inflation over the past 12 months was 4.6%, according to the BOI.
“Looking at the past six months,” said the BOI, “and even more so over the past three months, the pace of inflation is moderating in the prices of both tradable goods and non-tradable.”
“One-year inflation expectations and forecasts are within the target range, near the upper bound. Expectations derived from the capital market for the second year onward, too, are within the target range,” the bank said.
“Economic activity in Israel remains strong, but a number of economic indicators point to some moderation in activity. The labor market remains tight, and in a full-employment environment, but the downward trend in the job vacancy rate continues,” the statement continued.
“The Research Department revised its macroeconomic forecast, predicting that GDP will grow by 3% in each of 2023 and 2024, and some of the moderating effects of monetary restraint on activity will be realized later than in the April assessment,” the bank said.
“The main risk to the forecast is the materialization of a scenario in which the legislative and institutional changes with regard to Israel’s judicial system are accompanied by an increase in the country’s risk premium and continued depreciation of the shekel, an adverse impact to exports, and declines in domestic investments and in demand for private consumption,” it continued.
The bank noted however that “while inflation appears to be slowing—it sees a real possibility of having to raise the interest rate in future decisions, if the inflation environment does not continue to moderate as expected,” Globes reported.
Since the previous monetary policy decision, the shekel weakened by 1.8% against the U.S. dollar, by 2.3% against the euro and by 0.2% in terms of the nominal effective exchange rate.
Produced in association with Jewish News Syndicate
(Additional reporting provided by Suparba Sil)
Edited by Suparba Sil
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