The Bank of Israel decided this month to keep the interest rate unchanged at 0.1 percent.
“The inflation environment remains below the target but there has been some increase in inflation expectations for the short and medium terms,” the Monetary Committee said in a release. “In the coming months a temporary decline in the annual inflation rate is expected.
Economic activity continues to expand in line with the potential growth rate, with positive growth in goods exports despite the appreciation, and services exports increased at a solid pace.
However, investment in residential construction has declined for the past three quarters. Housing market data continue to indicate a slowing of activity with declines in home prices according to the last three monthly readings.
Nevertheless, labor market data continue to indicate a high level of activity in a tight labor market.
Since the last interest rate decision the shekel has weakened by 3.1 percent in terms of the effective exchange rate, and by 1.6 percent against the dollar. In January, the Bank of Israel intervened in the foreign exchange market, buying $1.8 billion.