Bank of Israel raises interest rate by 50bps

The Bank of Israel on Monday raised its benchmark interest rate by another half a percentage point, the eighth straight meeting it has increased rates to try to rein in inflation that remains above five per cent.

The central bank lifted its key rate to 4.25 per cent — its highest level since late 2008— from 3.75 per cent. In April, policymakers began raising the rate from 0.1 per cent and have been aggressive during a front-loading process, but most analysts believe the tightening cycle is close to over.

Despite the rate hikes, Israel’s annual inflation rate rose to a 14-year high of 5.4 per cent in January from 5.3 per cent in December — well above the government’s one per cent to three per cent annual target range and fuelling public anger at spiking living costs.

At the same time, Israel’s economy grew a faster than expected 6.5 per cent in 2022, although growth is expected to slow to below three per cent this year amid the steep rate hikes.

A Reuters poll had found that nine of 15 economists had expected a 25 basis points move, while six others foresaw a 50 basis point hike. — Reuters

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