Bank of Israel continued to raise rates
2023.01.02 11:05
Bank of Israel continued to raise rates
Budrigannews.com – The Bank of Israel said on Monday that it wants to stop inflation from rising above 5% and that it will likely continue to raise its benchmark interest rate a little bit more in the coming months.
As anticipated, the central bank increased its key rate from 3.25 percent to a 14-year high of 3.75 percent. The rate was raised from 0.1 percent in April by policymakers, who have been aggressive during a front-loading process. However, the majority of analysts believe that the tightening cycle is almost complete.
Even though inflation is lower than most of the West, Bank of Israel Governor Amir Yaron said that monetary policy was already “restrictive.” However, he was concerned about inflation. The labor market is tight, and the new government is planning significant expenditures to fulfill coalition agreements.
Yaron was unable to commit to a key rate of 4% in a year, despite the fact that the central bank’s own economists anticipate only one more quarter-point increase.
He told reporters that the rate of hikes would still be determined by data. Yaron stated, “We won’t hesitate to raise rates further,” adding that he anticipates that inflation will begin to decrease in the second quarter. I think that interest rates will have to stay high in general.”
Israel’s annual inflation rose to a 14-year high of 5.3% in November from 5.1% in October despite the rate increases. This was well above the government’s target range of 1% to 3% per year and fueled public outrage at rising living costs.
The national bank’s staff sees expansion at 3% in a year, facilitating to 2% in 2024.
Yaron stated, “We are determined to reduce the inflation rate and bring it back within the target range.”
This week, a new government led by Benjamin Netanyahu came into office. His coalition partners have demanded a substantial budget. Yaron warned against a rise in debt and the deficit.
According to him, “It is important that the new government acts with the necessary responsibility with regard to fiscal policy” and wage agreements for the public sector. It is essential to recall that the Israeli economy can’t underestimate the high respect from the rating elements and worldwide monetary foundations.”
The economy of Israel expanded at an annualized rate of 1.9% in the third quarter, down from 7.4% in the previous three months.
The updated forecast from the Bank of Israel projects growth of 2.8% in 2023, down from 3%, and 3.5% in 2024.
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