The Bank of Israel left the interest rate in the economy unchanged yesterday, but it is estimated that it is expected to rise in the coming months. The committee said in a statement: “High growth has been recorded in the economy alongside the corona virus, and various indicators point to continued growth in activity. The committee estimates that in the coming months the conditions will begin to gradually begin the process of raising interest rates.
“Inflation is in the vicinity of the upper limit of the target, and stands at 3.1% in the last 12 months. Inflation expectations for the coming year from most sources have risen, but are within the target range.”
It was written about housing prices that “the upward trend in house prices has accelerated in recent months, and these have risen by 11.3% in the last 12 months – a significantly higher rate compared to the rate of recent years.”
According to the research division’s analysis, the direct contribution of the cost-cutting measures announced in February will lead to a 0.2% drop in inflation. The members of the Monetary Committee believe that there is no fear of an inflationary outbreak.
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The decision of the Monetary Committee yesterday, headed by the Governor of the Bank of Israel, Prof. Amir Yaron, and the trends accompanying its announcement were expected to be known to all forecasters.
The zero interest rate remained unchanged despite the encouraging growth data in the economy, which amounted to 8.1% in 2021 and 16.1% in the fourth quarter of the year.
Moreover, inflation is also raising its head, and the latest expected index for the coming year has already reached 3% – the upper limit set by the government.
Harel Finance economists estimate that the rise in interest rates in Israel will wait until after the US interest rate rises, which is expected to happen as early as next month.
Guy Beit On, the chief economist at Psagot Investment House, believes that the Bank of Israel will raise interest rates during April-May. While interest rates in Israel remain unchanged, the US market is already pricing six interest rate hikes during 2022.