Bank of Israel raises interest rates

by Richard Kilner

Story link: Bank of Israel raises interest rates

The Bank of Israel has announced that it is increasing the interest rate by 25 basis points to 0.75%.

It is the lowest the Israeli rate has been since February when the bank cut rates by 25 basis points to 0.75%.

The change comes as the Consumer Price Index (CPI) exceeded forecasters’ predictions by rising to 1.1%, rather than 0.9%, raising the prospect of inflation beyond expectation.

CPI, which had previously stood at 0.8%, actually rose by 0.5% if measures such as tax alterations are excluded, and since the beginning of the year it has risen by 3.2%.

The Israeli economy has ceased to decline and entered a period of modest growth, with Q2 showing a rise of 1% in GDP.

This echoes France, Germany and Japan, all of which showed growth in the second quarter of this year.

The rise of inflation and the need to moderate it was the reasoning behind the increase in the interest rate, although the Bank of Israel also considered the need to continue supporting the country’s economy.