The Bank of Israel again raised interest rates on January 2 with a 0.5-point increase to 3.75 percent.
Inflation in Israel was 5.3 percent over the past 12 months, the Bank reported, but said inflation expectations for all ranges were within the target range.
Economic activity in Israel has remained strong, but the growth rate appeared to have slowed relative to the first half of 2022.
The labor market remains tight, although in recent months there has been some moderation in employment data.
The Bank’s research department revised its macroeconomic staff forecast, and said GDP is expected to grow by 2.8 percent in 2023, and by 3.5 percent in 2024. The level of economic activity derived from the forecast remains strong, particularly by international comparison, the department said.
Home prices increased in the past 12 months by a “significantly” high rate. The number of building starts and permits remains higher than in the past, although the number of home purchases continues to decline. The volume of new mortgages taken out stands at close to its average precrisis level.
Since the Bank’s rate hike last month, the shekel weakened by 1.6 percent against the US dollar, by 5.8 percent against the euro, and by 3.4 percent in terms of the nominal effective exchange rate.
“The slowdown in economic activity abroad continued, and the risk of a recession is increasing in many countries,” the Bank said.
“The inflation environment remains high, but in the US, the trend of moderation of inflation continues, and there are initial signs of moderation in inflation in the eurozone and in Britain,” the Bank added.
