The Monetary Committee of the Bank of Israel left its interest rate unchanged a month after unexpectedly cutting the benchmark to near-zero to boost domestic demand. The five-member monetary policy panel, led by Governor Karnit Flug, kept borrowing costs at 0.1% on Monday.
The central bank cited rising inflation expectations, a weaker shekel and rising housing costs as main considerations behind its decision.
The bank’s research department, in a separate statement, kept its forecast for 2015 economic growth at 3.2%, while raising the outlook for 2016 to 3.5% from 3%. The Bank of Israel has brought rates to a record low as it seeks to weaken the shekel and shore up exports.
Last year, economic output grew 2.8%, its slowest annual pace in five years. Indicators of real economic activity show a mixed picture in the first quarter: some weakness in exports is apparent, the Composite State of the Economy Index increased by 0.2% in February, and preliminary data from the Companies Survey indicate continued growth at the moderate rate that characterized it last year. Labor market indicators point to continued improvement.
The Bank of Israel will continue to monitor developments in the Israeli and global economies and in financial markets. The Bank will use the tools available to it and will examine the need to use various tools 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 continue to keep a close watch on developments in the asset markets, including the housing market.
