Bank of Israel Governor Prof. Stanley Fischer raised the interest rate by 25 basis points Monday evening, to 2.5%.
The move was the second month in row that the interest rate was raised. The rise was widely expected, as a Bloomberg survey showed that every analysts surveyed expected the move.
The Bank of Israel said that its decision was based on the fast economic growth which was driven by domestic demand, the inflation figures, and the housing market, saying "The steep increase in house prices continued; in the last twelve months they have risen by 17.5%. Although there was a drop in the volume of new mortgages in January, the volume of housing loans is still expanding rapidly."