Bank of Israel Raises Base Interest Rate Amid Inflation

Bank of Israel Raises Base Interest Rate Amid Inflation

The Bank of Israel on Monday announced a hike in its base interest rate – the rate it charges commercial banks for loans – from 2.75% to 3.25%. It is the sixth interest rate increase in a row and equals a high that was set in September 2011. In April, the rate was just 0.1%. Israel has experienced a 5.1% annual inflation rate over the past 12 months, the bank noted, far above the 3% upper bound of the government target range. “Inflation can be seen across the board in a wide range of CPI [consumer price index] components,” the bank said in a statement. “Economic activity in Israel remains strong. The labor market remains tight, and the GDP level remains higher than the long-term trend,” the bank said. “However, monetary policy tightening and moderation of activity abroad are expected to lead to some slowdown in economic activity in Israel as well, and a number of indicators are showing signs of the beginning of such a process.”

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