Bank of Israel keeps interest rate for September 2012 unchanged at 2.25%

The Bank announced that there will be no change in the prime interest rate next month
 
 
The Bank of Israel announced last Monday that there will be no change in the prime interest rate next month. The rate currently stands at 2.25%.   
 
In a press release explaining its decision, the Bank noted, "This is consistent with the Bank of Israel's interest rate policy, which is intended to entrench the inflation rate within the price stability target of 13% a year over the next twelve months, and to support growth while maintaining financial stability.  
 
The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel, the global economy, monetary policies of major central banks, and developments in the exchange rate of the shekel."
 
The Bank also noted that over the past 12 months there has been a slowdown, “even a halt” in the increase in home prices, but added “there was an increase this month in new mortgages granted, though it is too early to tell if there has been a change in this trend.” In addition, the Bank cited concerns about the global economy, and the level of economic risks from around the world due to developments in Europe.  
 
The level of economic risks from around the world, due to the developments in Europe, remains high, leading to concerns of negative effects on the domestic economy. Second quarter macro figures which became available this month indicate continued deterioration in the state of the economies in the eurozone, the UK, Japan, and emerging markets.
 
In contrast, there was a slight improvement in US economic activity this month. The Bank of Israel will continue to monitor developments in the Israeli and global economies and in financial markets, particularly in light of the increasing uncertainty in the global economy.
 
The Bank will use the tools available to it to achieve its objectives of price stability, the encouragement of employment and growth, and support for the stability of the financial system, and in this regard will keep a close watch on developments in the asset markets, including the housing market.
 
This will be the third month in a row the prime rate will stand at 2.25%. The last time the Bank cut the interest rate was at the end of January, by 25 basic points, from 2.75% to 2.5%. The rate then stood firm from February 1 through June 30.