The monetary policy committee, led by Governor Stanley Fischer, held the rate at 2.75%.
The central bank said in today’s decision that it was reducing its Israel growth forecast for next year to 2.8% from a September prediction of 3.2 percent, citing the European debt crisis.
Fischer said Dec. 7 that the bank was likely to lower its forecast to “around” the Organization for Economic Cooperation and Development’s 2.9% prediction.
The decision to leave the interest rate unchanged at 2.75% for January 2012 following the cut in the rate last month is consistent with the interest rate policy that is intended to entrench the inflation rate within the price stability target of 1–3% inflation 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, the monetary policies of major central banks, and developments in the exchange rate of the shekel. Inflation forecasts for the next twelve months––those calculated from the capital market, those of the forecasters and that of the Bank of Israel––are all close to the midpoint of the target inflation range.
Actual inflation over the last twelve months is continuing to settle more firmly within the target inflation range. Indicators of economic activity in Israel continue to support the assessment that the economy is still expanding, although more slowly than at the beginning of the year and during last year.
According to Bank of Israel assessments, the economy is expected to grow in 2012 at a rate of 2.8 percent. Most of the slowdown in growth derives from the weakness of exports, against the background of the weakness in the global economy; a moderation in domestic demand is also evident.
