The Monetary Committee of the Bank of Israel decided Monday to leave the current interest rate unchanged at 4.5 percent.
“Economic activity and the labor market continue to recover gradually. Alongside this, continued geopolitical uncertainty is reflected in the economy’s high risk premium,” the Bank said in a statement.
There has been some increase in the inflation environment, the Committee noted, adding that inflation in the past 12 months remained at 2.8 percent.
“Inflation expectations and forecasts from the various sources for the coming year increased, and are around the upper bound of the target range. Expectations for the second year and forward are within the target range, in its upper portion,” the Bank said.
Since the previous monetary policy decision, the shekel strengthened by about 1.1 percent against the dollar and the euro, and by about 1.2 percent in terms of the nominal effective exchange rate.
GDP expanded by 3.35 percent in the first quarter of 2024, compared with the previous quarter, reflecting growth in private consumption and in fixed capital formation. Nevertheless, the GDP remains 2.8 percent lower than its pre-war level.
Home prices have continued to increase; the housing component of the CPI increased by 0.6 percent, and the pace of annual increase is 2.7 percent, the Bank noted.
The global economy continued to expand in the first quarter. Inflation remains above central bank targets, and there was an increase in the interest rate path expected by markets.
“In view of the war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity,” the Bank emphasized.
“The interest rate path will be determined in accordance with the continued convergence of inflation to its target, continued stability in the financial markets, economic activity, and fiscal policy.”
