Bank of Israel hits the brakes on interest rates

The Bank of Israel raised the policy rate by 25 basis points from 4.25% to 4.50%. Thus, the bank continued to increase interest rates for 9 consecutive months.

This was also the expectation of economists participating in Bloomberg’s survey. Thus, interest rates reached the highest level since 2006.

The persistent high inflation and the political crisis that started with judicial regulation in the country are putting pressure on the economy. Israeli Prime Minister Benjamin Netanyahu suspended the controversial judicial regulation last week that has sparked mass protests across the country for weeks.

Inflation in the country continues to hover above the target of 1-3%.

In the statement made after the decision, it was stated that inflation was wide-ranging and maintained its high course. The growth forecast for 2023 has been revised downwards. It was emphasized that the inflation data will be the determining factor in the interest rate path.

The bank started to increase the policy rate, which was 0.1 percent last April.