The Bank of Israel believes measures taken by it and by the Finance Ministry will lead to a slowdown in the rise in housing prices in the coming year, according to the minutes of its July interest-rate decision.

The details of the narrow-forum policy discussion among Bank of Israel Governor Stanley Fischer and four members of management, which were released Monday, reveal that three of the four recommended making no changes to the interest rate, which the bank kept at 3.25 percent.

The remaining member of management recommended a quarter-percentage-point rise on the basis that the central bank should adopt a firmer policy with regard to housing prices, as long as there is no clear evidence that the steps taken so far are having a significant effect.

But in announcing its decision, the bank emphasized that while the annual rate of increase in house prices continues to be high – an annualized rate of 15.3% – it expects the increase to slow “over the course of the coming year.” It said the reasons for this prediction were “the effect of [previous] interest-rate increases, steps by the Bank of Israel in the mortgage market and steps by the Finance Ministry regarding real-estate taxation, together with the continued growth in building starts.”

The central bank also emphasized in its decision that indicators point to more-moderate economic growth in the second quarter, that central-bank interest rates in the major advanced economies are still low and that the past three consumer-price-index readings have been consistent with achieving the target inflation range.

“Inflation over the previous 12 months continues to be high, at 4.1%,” the minutes said. “However, inflation expectations for the next 12 months derived from the capital market and the average of the forecasters’ expectations declined over the past month, and are now slightly below the upper limit of the range.”

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