The Bank of Israel today cut its key interest rate by a quarter of a percentage point to 4.50 percent. It is trying to support the domestic economy at a time of conflict with the Palestinian Hamas movement.
Shifting priorities
According to Bloomberg, the decision signals that the central bank is shifting its priorities to support economic growth, as it believes that the situation in the financial markets has already stabilized. The Israeli shekel has strengthened significantly against the dollar in the past two months and Israeli stocks have already erased any losses they have suffered since the start of the conflict with Hamas. The fall in inflation has also helped create room for interest rate cuts, Bloomberg reports.
Inflation outlook
Annual consumer price growth in Israel slowed to 3.3 percent in November from 3.7 percent in October. However, inflation remained above the central bank’s target range of one to three percent. However, the central bank expects inflation to average only 2.4 percent next year.
The bank expects Israel’s gross domestic product (GDP) to have increased by two percent last year. It also expects growth of two percent this year, before accelerating to five percent next year.
Source Czech Press Office
