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Last update - 22:34 25/08/2008
Israel Bank raises interest rate for second time in a month
By Yuval Maoz, TheMarker Correspondent
Tags: interest, Israel, inflation 

Bank of Israel Governor Stanley Fischer announced on Monday that he had raised the interest rate by 0.25% to 4.25%.

Bank officials said the decision resulted from a relatively high inflation rate over the past 12 months, and is aimed at keeping it within the target range of the Treasury.

Many business analysts anticipated the increase, but not so soon, as the Bank raised the interest rate a mere month ago, despite a low Consumer Price Index level in June.
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In July, however, the CPI soared to a level of 1.1%, and drove the inflation rate to 4.8% for the past 12 months, which necessitated another increase in the interest rate.

The Bank of Israel predicts that the inflation rate will remain consistent over the next 12 months.

Bank officials have admitted that the grounds for the decision were not clear-cut.

"Some econometric models suggested that in order to get the inflation rate in line with the government policy, we have to raise the interest rate this month, and others suggested the opposite," they said.

"The Bank of Israel will continue to follow the fiscal developments in the Israeli and global economies closely, in order to ensure a stability of prices, which is instrumental to a sustainable growth," they concluded.

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