The Bank of Israel’s Monetary Committee decided Monday to leave the interest rate unchanged at 4.5 percent.
Economic activity continues to recover moderately in view of geopolitical developments, the Bank said. “In the fourth quarter of 2024, the growth rate moderated, reflecting a marked increase in most domestic uses, which, combined with supply constraints, was largely fulfilled through increased imports.”
At the same time, previous GDP data were revised, such that GDP grew by 1 percent in 2024, the Bank said.
The annual inflation rate increased, to 3.8 percent — above the upper bound of the target range — partly due to tax increases. Inflation is expected to enter into the target range in the second half of the year.
The labor market remains tight, as indicated by unemployment, job vacancy, employment, participation, and wage data.
Since the previous interest rate decision, the shekel has appreciated by 1.9 percent against the US dollar, by 1.3 percent against the euro, and by 1 percent in terms of the nominal effective exchange rate.
Israel’s risk premium, as measured by the 5-year CDS price and by the spreads on dollar-denominated government bonds, continued to decline, but remained higher than in the prewar period.
Home prices rose by 7.3 percent in 2024, the Bank reported.
Activity in the construction industry continues to be influenced by labor shortages, but the difference between the number of people currently employed in the construction industry and their number prior to the war has narrowed.
