BoI leaves interest rate at 3.25%

Central bank says decision consistent with process of returning the interest rate to a more normal range intended to position inflation firmly within the target range.

By NADAV SHEMER
June 27, 2011 23:03
1 minute read.
The Jerusalem Post

Stanley Fischer 311. (photo credit: Bloomberg)

Bank of Israel Governor Stanley Fischer decided on Monday to keep the benchmark interest rate at 3.25 percent in July, as predicted by most analysts in the days leading up the decision.

In announcing its decision, the central bank said that it was consistent with the process of returning the interest rate to a more normal range intended to position inflation firmly within the target range, and to support further growth, while maintaining stability.

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“At the current level of the interest rate, monetary policy continues to be expansionary,” it said.

It said that the annualized rate of inflation continues to be high, at 4.1%, as is the annualized increase in house prices, at 15.3%. But it noted that inflation expectations derived from the capital market declined over the past month, and that housing prices are expected to be affected over the coming year by the effect of recent rate increases and by recent measures taken by the bank and the Finance Ministry in the mortgage market and real estate taxation.

The bank also noted that interest rates in the major advanced economies are still lower than in Israel, and “are expected to remain so in the next few months.”

“Against the background of the acceleration in inflation in fast growing economies, several central banks increased their interest rates again this month.

However, the concern of a slowdown in US growth and the worsening of debt risks in Europe led to expectations of a slowdown in the pace of interest rate increases in other markets,” it said.

The minutes of the discussions prior to this interest rate decision will be published on July 11.


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