The Bank of Israel has announced the interest rate for January 2017 will remain unchanged at 0.1 percent.
The BOI wrote in its report that the decision to keep the interest rate for January 2017 unchanged at 0.1 percent is consistent with the Bank’s monetary policy, which is intended to return the inflation rate to within the price stability target range of 1–3 percent a year, and to support growth while maintaining financial stability. “The Monetary Committee continues to assess that in view of the inflation environment, and of developments in the global economy, in the exchange rate, as well as in monetary policies of major central banks, monetary policy will remain accommodative for a considerable time,” the report said.
The Consumer Price Index for November declined by 0.4 percent, more than forecasters’ predictions of a 0.1 percent decline, on average, according to the BOI report. The decline is partly explained by a seasonal decline in the fruit and vegetables component of 4.3 percent, which was large compared with the decline in recent years, and a seasonal increase of 1.5 percent in the clothing and footwear component that was low compared with the increase in recent years. The inflation rate as measured by the change in the CPI over the past 12 months was -0.3 percent, similar to the figure for last month.
One-year term inflation expectations were impacted by the surprise in the CPI for November. Inflation expectations derived from the capital market increased slightly, to 0.6 percent, and the average of private forecasters’ projections declined slightly to 0.6 percent. Expectations for inflation derived from banks’ internal interest rates increased slightly, after half a year of stability, to 0.4 percent. Forward expectations for medium and long terms fluctuated as well—they increased following the US elections and declined after the publication of the November CPI.
The picture of real economic activity remains positive, and various indicators point to a stable rate of growth. Foreign trade trend data indicate growth in imports, and contraction of exports due to a temporary slowdown in exports of electronic components. Goods exports excluding electronic components reached $3.5 billion in November (seasonally adjusted), and are high relative to their level in the recent period. The Purchasing Managers Index and Consumer Confidence Indices compiled by the Central Bureau of Statistics and by Bank Hapoalim increased in November, with the latter at a six-year high.
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