Bank of Israel Hails ‘Full Employment Environment’

The Bank of Israel Monetary Committee announced its decision on Monday to keep the interest rate unchanged at 0.25 percent.

The BoI gave several reasons for the decision. At the top of the list it noted that “the inflation environment remained near the lower bound of the target range…and in the coming months it is expected to hover near it.” The bank anticipates that inflation will stay “around the lower bound of the target, while medium-term and long-term expectations increased slightly toward the midpoint of the target.”

Economic vectors were found to be strongly encouraging. In its statement, it said in “the fourth quarter of 2018, the economy returned to a growth rate that is in line with the long term pace, after slowing in the second and third quarters of 2018.”

Overall, the assessment is that “the economy is in a full employment environment. In particular, wages continue to rise, led by the business sector and across all industries.”

The strength of the Israeli economy was contrasted with the global macroeconomic picture, which, it said, “continues to point to a decline in both the growth and inflation rates. The main risks include the slowdown in Europe, an escalation of the trade war, and Brexit. The IMF again revised its growth forecast downward for most regions, particularly Europe.”

Regarding future policy, the BoI cited “the rising path of the interest rate will be gradual and cautious, in a manner that supports a process at the end of which inflation will stabilize around the midpoint of the target range, and that supports economic activity.”