Interest Rate Raised to 3.25

Bank of Israel announced the raising of the interest rate for June by 25 basis points.

Gil Ronen , | updated: 8:57 AM

Bank of Israel
Bank of Israel
Flash 90


The Bank of Israel announced Tuesday the raising of the interest rate for June by 25 basis points, to 3.25 percent.
BoI stated that the decision is consistent with the process of returning the interest rate to “a more normal range” intended to position inflation firmly within the target range, and to support the further recovery of economic activity, while maintaining financial stability. 
The rate of increase in the interest rate is not pre-determined, but is set in accordance with the inflation environment, growth in Israel and globally, the monetary policies of the leading central banks, and developments in the exchange rates of the shekel, the Bank explained. 
The inflation environment is still above the upper limit of the target inflation range, BoI assured. Inflation over the previous twelve months was 4 percent. 
Inflation expectations for the next twelve months are still slightly above the upper limit of the range this month. This, despite several background developments that could be expected to moderate inflation, such as the appreciation of the shekel in recent months and the fall in commodity prices.
Most economic indicators published this month support the assessment that the rapid expansion of financial activity continued in the first quarter of 2011 and in April, specifically on the export side, but also in domestic demand and employment.
National Accounts data for the first quarter are consistent with a growth rate higher than that in the most recent Research Department forecast (4.5 percent GDP growth in 2011). Employment data indicate continued expansion, with the economy approaching a full employment situation. 
The annual rate of increase in house prices continues to be high, although it has slowed a little; in the last twelve months, house prices increased by 13.9 percent.