Bank of Israel Remains Vigilant Against Inflation with Another 3/4 Point Rate Hike

The Bank of Israel on Monday raised its benchmark interest rate by three-quarters of a point for the second meeting in a row, citing its determination to move inflation back to within its target, Reuters reported. The central bank lifted its key rate to 2.75% from 2.0% in its fifth straight decision to hike rates. In April, policymakers had begun raising the rate from 0.1% -- an all-time low where it had stayed for the prior 15 decisions since a 0.15 point reduction at the outset of the COVID-19 pandemic. "The Israeli economy is recording strong economic activity, accompanied by a tight labor market and an increase in the inflation environment," the Bank of Israel said in a statement. "The (monetary) committee has therefore decided to continue the process of increasing the interest rate." Israel's annual inflation rate stood at 4.6% in August after reaching a 14-year high of 5.2% in July, topping the government's 1%-3% annual target range and creating public anger at spiking living costs ahead of a Nov. 1 election. At the same time, Israel's economy grew an annualised 6.8% in the second quarter from the first quarter. In updated forecasts, the central bank projected economic growth of 6% in 2022, up from a prior estimate of 5%, easing to a 3% pace in 2023. Inflation is expected at 4.6% this year, falling to 2.5% in 2023. Read more.