Money Shekels bills 521.
(photo credit: Courtesy)
Rising uncertainty about the pace of the global recovery should not have a
significant impact on short-term domestic activity, the Bank of Israel’s
management team said at its meeting last month to set the June interest
Three of the four members of management who met with Bank of Israel
Governor Stanley Fischer at the narrow-forum policy discussion recommended
lifting the interest rate, which rose by 25 basis points to 3.25 percent,
according to the minutes that were released Monday.
But it was inflation
and inflation expectations that led the discussions, along with geopolitical
considerations and the usual concerns over rising house prices, that the bank
said “continues to be high, although it has slowed a little” to an increase of
13.9% in the last 12 months.
Management “noted that the inflation
environment is still above the upper limit of the target inflation range, the
midpoint of which is 2% inflation a year,” the minutes said. “Inflation over the
last 12 months was 4%, and although inflation, seasonally adjusted, was low in
the last two months, it is too soon to conclude that this represents a turning
point. Participants also noted that 12-month forward inflation expectations,
both those derived from the capital market and those of forecasters, are still
above the upper limit of the inflation target.
“The point was also made
that according to the Research Department forecast, inflation is expected to
decline to within the target range in the next 12 months, assuming that the
interest rate rises gradually to 4.2%.
The lower-than-forecast rate of
inflation in the last two months does not provide a strong enough reason to
deviate from the upward-sloping path of the interest rate.”
On Sunday, a
Bank of Israel report said raising the minimum wage would have little to no
affect on the effort to alleviate poverty.
“In order to reduce poverty by
a significant amount, improved compliance with the Minimum Wage Law is
required,” the bank said.
The minimum monthly wage is set to be updated
to NIS 4,100 in July 2011 and to NIS 4,300 in October 2012, leading to a
reduction in the incidence of poverty of only 0.1%, but to an increase of at
least NIS 427 million in public expenditure in 2011-2013, due to direct salary
costs, the bank said.