The Bank of Israel Monetary Committee has kept the benchmark interest rate for February unchanged at 0.1%.
The interest rate has been unchanged since it was cut to a historic low of 0.1% last March. The decision to keep the interest rate for February 2016 unchanged is consistent with the Bank of Israel's monetary policy, which is intended to return the inflation rate to within the price stability target of 1–3% a year, and to support growth while maintaining financial stability.
The following are the main considerations underlying the decision: Against the background of increasing volatility in financial markets and energy prices, the short-term inflation environment continued to decline this month, and there were declines in medium-term (forward) expectations as well. Long-term (forward) expectations remain entrenched above the midpoint of the target range.
Further price reductions initiated by the government (in public transportation, water, and automobile insurance) are expected to be reflected in the CPI for January and February. Partial indicators that became available this month point to economic activity continuing its moderate improvement in the fourth quarter of 2015, and the effect of the security situation on economic activity remaining moderate.
The Companies Survey indicates a slight improvement vis-à-vis the third quarter. The job vacancy rate continues to increase, and together with an increase in wages reflect a positive picture in the labor market.
In recent months, the increase in home prices accelerated, and they rose by 7.6 percent over the past 12 months. The volume of new mortgages taken out remains high. The elevated level of activity in the construction industry is expected to continueto contribute to increasing supply.
The Monetary Committee is of the opinion that the risks to achieving the inflation target have increased, and the risks to growth remain high. 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.
