Israel's Bank Keeps Interest Rate at 4.5% for the 14th Consecutive Time

SadaNews - Today, Monday, the monetary committee at the Bank of Israel kept the interest rate unchanged at 4.5%, marking the 14th consecutive time it has done so.

This decision aligns with the expectations of the majority of economic experts who anticipated that the central bank would maintain its current monetary policy.

The decision comes despite the inflation rate currently standing at 2.9%, which is within the range set by the bank. They explained that this move is due to the significant uncertainty related to developments in the ongoing war.

The last adjustment to the interest rate was made in January 2024, when the bank's governor, Professor Amir Yaron, decided to lower it by a quarter of a percentage point.

Since then, the bank has chosen to maintain the same interest rate level amid ongoing economic uncertainty, both locally and internationally.

Finance Minister Bezalel Smotrich sent a letter this month to the Governor of the Bank of Israel, urging him to lower the interest rate.

Smotrich stated, "The governor should have lowered the interest rate a long time ago. If he doesn't do that, I will lower taxes myself." He made this comment during a meeting with leaders in the business sector.

Last August, the bank also decided to keep the interest rate at 4.5%, even though the price index in July showed a slowdown in the rate of inflation to 3.1%, which is just one-tenth of a percentage point above the upper target limit.

However, the monetary committee in the bank believed that there is no room to lower the interest rate at this stage, given the ongoing uncertainty due to the conflict.

According to economic estimates published by the bank's research division in January, the pace of economic recovery in Israel remains slow.

These estimates indicated that tax changes, particularly the increase in the value-added tax, alongside continuing supply-side restrictions and a buildup of excess demand, are expected to lead to a rise in the inflation rate during the first half of the year, which is expected to fall back within the targeted range in the second half.