Bank of Israel Raises Interest Rates by 0.5%

The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has raised the interest rate by 0.5% to 1.25%, as expected, in order to combat rising inflation, which has reached nearly 5% over the past year in Israel. This is the first time that the Bank of Israel has announced a 0.5% rate hike in over a decade.

This is the third rate hike made by the Bank of Israel over the past four months, after raising the rate from its historical low of 0.1% to 0.35% in April and then by a further 0.4% to 0.75% last month.

The Bank of Israel research department has revised its 2022 GDP growth forecast downwards by 0.5% to 5%, following the Israeli economy’s unexpected contraction of 1.9%, in annualized terms, in the first quarter of 2022. This forecast is in line with the OECD’s forecast for growth in the Israeli economy. The Bank of Israel sees Israel’s economy growing by 3.5% in 2023.

The Bank of Israel sees an inflation rate of 4.5% in 2022, and 2.4% in 2023.