Bank of Israel raises interest rate to 2.25%

The BOI decided to raise the interest rate by a quarter point to get the country's inflation rate back on target. Analysts see further tightening in coming months
 
The Bank of Israel (BOI) announced last Monday the first increase to the key lending rate, raising the interest rate from 2% to 2.25%.
 
Following the BOI announcement, the shekel strengthened against the dollar, dropping to NIS 3.6040/$1 compared to NIS 3.6170/$1 earlier in the day. The BOI decided to raise the interest rate by a quarter point to get the country's inflation rate back on target. Analysts see further tightening in coming months.
 
The rate increase to 2.25% was the first since September and came as rising housing prices and strong economic growth add to inflation pressure. In a press release the Bank noted that: "The decision to increase the interest rate for February by 25 basis points to 2.25% is consistent with the gradual process of returning the interest rate to a more normal level intended to position inflation firmly within the target range, and to support the further recovery of economic activity, while maintaining financial stability."
 
Israel's annual inflation rose to 2.7% in 2010, with the Consumer Price Index (CPI) increasing 0.4% from November 2010 to December 2010.