The Bank of Israel announced on Monday that it has raised its key interest rate by 0.25% to 4.50%. This marks the highest level since December 2006 and is aimed at curbing inflation, which reached 5.4% in January, the highest level in 12 years and above the government’s target of 1-3 percent.
The decision to increase the interest rate came after several consecutive meetings in which the central bank’s monetary committee assessed the economy’s conditions and the inflation outlook. In a statement, the bank explained that the hike is intended to curb inflation and ensure price stability.
The Israeli central bank signaled that it will continue to monitor economic and inflation data to determine the prospect of further interest rate hikes. The bank acknowledged that the pace of the rate hikes could be adjusted according to the economic and inflation data.
The bank’s governor, Amir Yaron, stated that “the decision to raise the interest rate was taken after a comprehensive review of the economic situation and the inflation outlook. We will continue to monitor the developments in the economy and the financial markets and will take the necessary steps to ensure price stability.”
The move is expected to have an impact on borrowing costs, including mortgages and loans, and may also affect the exchange rate of the Israeli shekel. The bank’s decision is in line with the recent trend of central banks worldwide to raise interest rates amid increasing inflation pressures.