Israel's Central bank raises key interest rate 25 BPs to 1.25%

The bank raised the rate due to "more firmly based" economic growth and because of annual inflation above the Government's target range
 
The Bank of Israel raised the interest rate for January last Monday by 25 basis points to 1.25%, making this the second month in a row for a rate increase, even as the rest of the world continues to leave rates low.
 
In late November, the bank raised the rate 25 basis points to its current December rate of 1%. The bank said it raised the rate for January due to "more firmly based" economic growth in Israel in recent months and because of annual inflation above the Government's target range.
 
The increase was widely expected due to recent rapid inflation. Recent figures suggest that Israel's economy has returned to a period of growth. Gross domestic product grew at an annualized rate of 2.2% during the third quarter, and the composite state-of-the-economy index, which measures several components, including foreign trade and manufacturing, has been on the rise for the last six months. In late August, the Bank of Israel was the first bank globally to raise rates, increasing the rate from a historic low of 0.50% to 0.75%, amid the global economic crisis.
 
Uriel Lynn, president of the Federation of Chambers of Commerce of Israel, praised the decision noting it was proper: "seeing as the Israeli economy is showing signs of recovery and the market is currently entering a process of renewal of growth and shrinking of unemployment." He added that a high inflation rate, resulting from inaction, could destabilize the market.