Governor of the Bank of Israel Prof. Stanley Fischer announced today that the Bank of Israel will keep its interest rate unchanged for May at 3.25%.
The current interest rate is the lowest ever for Israel. It reached its level after two consecutive cuts of 50 basis points each.
The decision was based on the fact that fundamental factors that brought rates to their current level have not changed enough to warrant a rate change.
Central bank executives identified two opposing forces influencing inflation. The first is higher food and energy prices, which have risen on a global level. Without those two factors, inflation in Israel is running at 1.8%. A second factor is the strong shekel and a global economic slowdown, which can impact local growth as well.
The Bank of Israel predicts that inflation will return to within the 1% to 3% target range within the next 12 months. Previous forecasts called for inflation to return to its target range by the end of 2008.
Published by Globes [online], Israel business news - www.globes-online.com - on April 28, 2008
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