Bank of Israel to keep interest rates at 0.1%

The Bank of Israel announced it is keeping their interest rate at 0.1% for the month of January. Growth and inflation remain healthy.

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Shlomo Vile,

Bank of Israel head Karnit Flug
Bank of Israel head Karnit Flug
Israel news photo: Flash 90

The Bank of Israel announced on Monday that it would leave interest rates unchanged, at 0.1%, for the month of January, which is an all-time low. The bank also raised its growth forecast and estimates that interest rates will rise only in the fourth quarter of 2017.

The Bank of Israel's decision comes against the background of the strengthening of the shekel last month (it rose 1.3% against the dollar), a surprising drop in the Consumer Price Index, and less than two weeks after the Fed decided to raise interest rates for the first time in a year.

Meanwhile, the Research Department has released an update to the forecast for inflation, interest rates and growth. As with the previous forecast, the bank expects that inflation will reach a level of 1% (the lower limit of the inflation target) in the fourth quarter of 2017.

The growth forecast rose to 3.5% for 2016 (compared with a previous forecast of 2.8%) and 3.2% in 2017 (compared with 3.1% in the previous forecast), due to higher than expected third quarter growth.

Bank of Israel Governer, Karnit Flug, held a press conference following the announcement, stating, “The current situation is the economy is growing at a good rate, the labor market continues to be strong, and inflation continues to be very low. We estimate that the economy will continue to grow at a good rate for the fourth quarter, supported by an expansionary monetary policy. Growth in 2016 was based primarily on private consumption and investment.”








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