The Monetary Committee of the Bank of Israel on Monday decided to increase the interest rate to 0.35 percent.
The Committee explained its decision by pointing out that the Israeli economy is recording strong growth, accompanied by a tight labor market and an increase in the inflation environment. So the Committee determined that conditions allow for the start of a gradual process of increasing the interest rate.
The pace of raising the interest rate will be determined in accordance with activity data and the development of inflation, in order to continue supporting the attainment of the policy goals.
The Committee also explained that inflation in Israel increased in recent months, but is significantly lower than inflation in most of the world. It is above the upper bound of the target range, at 3.5 percent over the past 12 months.
One-year inflation expectations increased, and are around the upper bound of the target range. Longer-term expectations are anchored within the target range.
Since the previous monetary policy decision, the shekel has weakened by 0.5 percent against the US Dollar and has strengthened by 3.8 percent against the euro and by 1.8 percent in terms of the nominal effective exchange rate.
The Research Department updated its staff forecast. In its assessment, GDP will grow by 5.5 percent in 2022 and by 4 percent in 2023.
The upward trend in home prices continued to accelerate, with prices rising by 13 percent in the past 12 months.
