Issue No. 126
The August interest rate of the Bank of Israel will remain unchanged; the chance for an additional rate cut in the coming months has lessened.
The Monetary Committee of the Bank of Israel (BoI) decided on July 27th to keep its interest rate for August unchanged at 0.1%. The underlying factors emphasized by the BoI in its August rate decision include: (a) a certain stabilization in the inflation environment – the rate of increase in the CPI over the past four months has been consistent with the price stability target range (1-3%), and furthermore, the capital market derived inflation expectations for the long-term are currently near the center of the range; (b) continuing moderate growth of the local economy, led by private consumption, despite the decline in export activity and industrial production, this according to indicators on overall activity in the economy (headed by June’s composite state-of-the-economy index, which increased 0.4%); (c) continued risk to the global economic recovery in light of the recent developments in China and Greece, while simultaneously expansionary monetary policy is being continued around the world; (d) estimates by the BoI that the US interest rate is expected to start climbing sometime this year, although by a moderate rate; and (e) continued heightened activity in almost all aspects of the local housing market.
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