Bank of Israel leaves interest rate unchanged at 4.5 pc

In announcing its decision the Bank said economic activity and the labour market in Israel continue to recover gradually. Alongside this, the extent of geopolitical uncertainty has increased, reflecting a relatively high-risk premium for the economy.

Also, inflation in the past 12 months has moderated, and is within the target range. Expectations and forecasts for the coming year increased slightly, and are around the upper bound of the target range.

Since the previous monetary policy decision, the shekel weakened by about 2.7 per cent against the US dollar, by about 2.6 per cent against the euro, and by about 2.3 per cent in terms of the nominal effective exchange rate.

Israel's GDP contracted by 5.6 per cent in the fourth quarter of 2023, compared with the third quarter. Over the year as a whole, GDP grew by 2 per cent. The GDP growth was in line with the Research Department's forecast from January 2024. The Research Department's assessment is that GDP will grow by 2 per cent in 2024 and by 5 per cent in 2025.

In view of the war against Hamas terrorists in Gaza the forecast is characterized by a high level of uncertainty, explained the Bank.

In the housing market, home prices increased in the past two months. The housing component of the CPI declined by 0.3 per cent, and the pace of annual increase continued to moderate, reaching 2.6 per cent. The constraints and activity difficulties in the construction industry in view of the war have moderated, but remain significant.

The pace of global economic activity was surprisingly good in view of stronger activity in the US, while the economic weakness in the eurozone continued. Inflation moderated in many countries, but in most it remains above the central bank targets. According to market assessments, these are expected to moderate the path of interest rate declines. (ANI/TPS)