BoI keeps interest steady as uptrend in home prices slows down
Israeli interest rates will remain unchanged at 2% for the third month in a row, as had been widely expected.
Israeli interest rates will remain unchanged at 2% for the third month in a row, as had been widely expected. Among reasons given by the central bank, it cited its reluctance to widen the interest rate gap between the shekel and most major currencies, interest on which is expected to stay low for a long time.
The Bank of Israel also said inflation isn't a worry at this point: It is running within the bounds of the target range set by government, which is 1% to 3%. The central bank predicts that inflation over the next 12 months will run at 2.6%, while the target range is 1% to 3%.
The bank also said the upward spiral of housing prices seems to be slowing and fourthly, that economic activity is running at a brisk 4% a year.
Bank of Israel governor Stanley Fischer has been openly concerned about the rise in housing prices, but he chose to attack the problem by raising the cost of mortgages specifically, rather than lifting interest rates.
The higher the rate of interest, the more the shekel is likely to appreciate, which is bad for exports. Economic indicators show that exports have been declining, which is a matter of acute concern to Israel's economic leaders.
Only four of 12 economists surveyed by Bloomberg predicted a rate hike for January to 2.25%.
The Bank of Israel last night repeated that the decision was consistent with its aim of restoring interest rates to "normal" levels. Analysts are largely predicting that the central bank will raise its rate for February precisely to achieve that aim - approaching "normal" levels of interest.