No news from the Bank of Israel Monetary Committee is good news. On Monday, the committee had no news. No change, that is, in the interest rate which it left unchanged at its historic low of 0.1%, as expected.
Explaining why it took no action, the BoI said, “The rapid recovery of economic activity continues as the Covid-19 pandemic subsides in Israel. The deterioration in the security situation that lasted approximately 10 days apparently had only a limited negative impact. The significant increase in consumption continued even in the industries that were particularly hard hit by the restrictions during the Covid-19 crisis.”
The bank commented Monday on a range of issues. On unemployment, it noted problems which are also being seen in the U.S: “The broad unemployment rate declined to 9.6%, and since the exit from the third lockdown in February, the modified employment rate has increased. Alongside this, some of the data indicate difficulties in the labor market’s recovery process: the number of job vacancies continues to rise, alongside an increase in employers’ difficulty in recruiting new workers in some industries.”
Home prices have “increased by a relatively rapid rate of 4.5% in the past 12 months. Investors’ share of total home purchase transactions increased. However, the rate of increase of rental prices remained moderate.”
Inflationary data is being watched carefully, but no cause for alarm: “The inflation environment remains low, but is in an upward trend. The CPI increased by 0.3% in April, and inflation in the past 12 months is 0.8%. According to assessments, the inflation rate is expected to reach the target range following the publication of the CPI reading for May. Inflation expectations for the coming year from all sources continued to increase, and are within the inflation target range. Medium- and long-term inflation expectations also increased, and are anchored at the midpoint of the target range.”
It concluded upbeat but not euphoric: “The return to normal life in Israel supports rapid growth in the coming year. However, there are still challenges to economic activity in view of the health risks in Israel and abroad and the impact to the economy, particularly the labor market.”