Bank of Israel holds rates steady as inflationary pressures mount

Bank of Israel’s monetary committee decided on Wednesday to keep the interest rate unchanged at 4.5 per cent.

“We have seen an increase in the inflation environment in view of the supply limitations in the economy. The increase in the pace of inflation is broad, and is reflected in both the nontradable and tradable components.” BOI’s Monetary Committee said in a statement.

Israel’s Consumer Price Index for August rose by 0.9 percent, and inflation in the past 12 months stands at 3.6 percent, which is above the upper bound of the target range.

Since the previous interest rate decision, Israel’s currency – shekel has depreciated by 2.8 percent against the US dollar, by 1.5 percent against the euro, and by 2.3 percent in terms of the nominal effective exchange rate. The exchange rate has fluctuated with high volatility in view of various developments in the war and in the geopolitical environment, the statement added.

“In view of the increasing geopolitical uncertainty, the monetary policy is focusing on stabilising and reducing the uncertainty in markets, alongside maintaining price stability and supporting economic activity.” Amir Yaron, Governor of the Bank of Israel, said in a statement.

“The monetary policy is expected to continue to be restrictive, and it will be adjusted as necessary in line with data and developments—in the inflation environment, the level of activity, fiscal policy, and the markets.” Yaron added.

Attribution: BOI’s Monetary Committee & BOI Governor’s remarks