The Bank of Israel announced Monday that it has kept the interest rate for May unchanged at 2.5%. This is the third consecutive month that the interest rate has been left unchanged after it was cut by 25 basis points at the end of January.
The Bank of Israel said that the main considerations underlying the decision were that "the CPI increased by 0.4% in March, at the upper bound of the range of forecasts. For the third consecutive month, inflation over the previous 12 months is near the midpoint of the target inflation range - there do not appear to be other domestic inflationary demand pressures. Expectations for the Bank of Israel interest rate in the coming months are stable."
The Bank of Israel added that "indicators of real economic activity that became available this month are consistent with the growth forecast published last month by the Bank of Israel, according to which growth in 2012 will be 3.1%. Based on various surveys, companies' expectations for future activity are slightly more positive than in previous surveys."
However, encouraging domestic economic developments were balanced by global anxieties. The Bank of Israel said that "after a period of relative calm in terms of concerns over the debt crisis in Europe, concerns of a renewed worsening increased this month. Global macro figures continued this month again to indicate a slower rate of recovery in the global economy, with some slowing in growth in the US and China. With that, this month the IMF revised upward its global growth and world trade forecasts slightly, while emphasizing the risks to the recovery process."
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