AGL 40.08 Increased By ▲ 0.05 (0.12%)
AIRLINK 128.18 Increased By ▲ 0.48 (0.38%)
BOP 6.70 Increased By ▲ 0.09 (1.36%)
CNERGY 4.53 Decreased By ▼ -0.07 (-1.52%)
DCL 9.22 Increased By ▲ 0.43 (4.89%)
DFML 41.58 No Change ▼ 0.00 (0%)
DGKC 87.25 Increased By ▲ 1.46 (1.7%)
FCCL 32.60 Increased By ▲ 0.11 (0.34%)
FFBL 64.52 Increased By ▲ 0.49 (0.77%)
FFL 11.61 Increased By ▲ 1.06 (10.05%)
HUBC 111.50 Increased By ▲ 0.73 (0.66%)
HUMNL 14.98 Decreased By ▼ -0.09 (-0.6%)
KEL 5.03 Increased By ▲ 0.15 (3.07%)
KOSM 7.36 Decreased By ▼ -0.09 (-1.21%)
MLCF 40.95 Increased By ▲ 0.43 (1.06%)
NBP 61.39 Increased By ▲ 0.34 (0.56%)
OGDC 195.50 Increased By ▲ 0.63 (0.32%)
PAEL 27.50 Decreased By ▼ -0.01 (-0.04%)
PIBTL 7.70 Decreased By ▼ -0.11 (-1.41%)
PPL 152.94 Increased By ▲ 0.41 (0.27%)
PRL 26.62 Increased By ▲ 0.04 (0.15%)
PTC 16.17 Decreased By ▼ -0.09 (-0.55%)
SEARL 83.71 Decreased By ▼ -0.43 (-0.51%)
TELE 7.82 Decreased By ▼ -0.14 (-1.76%)
TOMCL 36.50 Decreased By ▼ -0.10 (-0.27%)
TPLP 8.85 Increased By ▲ 0.19 (2.19%)
TREET 17.04 Decreased By ▼ -0.62 (-3.51%)
TRG 58.29 Decreased By ▼ -0.33 (-0.56%)
UNITY 27.20 Increased By ▲ 0.34 (1.27%)
WTL 1.32 Decreased By ▼ -0.06 (-4.35%)
BR100 10,000 No Change 0 (0%)
BR30 31,002 No Change 0 (0%)
KSE100 94,960 Increased By 768 (0.82%)
KSE30 29,500 Increased By 298.4 (1.02%)

JERUSALEM: The Bank of Israel reversed course on Monday, saying it would soon be forced to raise short-term interest rates due to robust economic growth and rising price pressures, as it held rates steady for a 15th straight policy-setting meeting.

At the last meeting six weeks ago policymakers said there was no hurry to start tightening while inflation was expected to remain benign, in contrast to elsewhere in the West.

But since keeping its benchmark interest rate at an all-time low of 0.1% on Jan. 3, economic indicators have shown the economy heating up, overcoming the COVID pandemic, while inflation reached its highest level in more than a decade.

"The (monetary) committee's assessment therefore is that in the coming months, conditions will allow for the start of a gradual process of raising the interest rate in line with the path of inflation and the pace of growth and employment," it said in a statement.

The bank said higher rates would support the achievement of the "monetary policy goals and to ensure the continued proper functioning of the financial markets".

This was a big change from its longstanding prior statement that it would "continue to conduct an accommodative monetary policy for a prolonged time."

Analysts are split as to the timing of the rate increase, with some saying it could come as early as the next decision on April 11. Others believe it could be May 23 or July 4, with the Bank of Israel waiting for the US Federal Reserve to lift rates first.

"It's not clear yet how aggressive the cycle will be, but we don't expect rates to rise particularly far in the coming years," said Liam Peach, economist at Capital Economics, who expects rates to start to rise in April and reach 1% by 2023.

Central banks in Britain, Poland, the Czech Republic and others have already raised short-term rates to rein in spiking inflation.

Israel's annual inflation rate rose to 3.1% in January from 2.8% in December, moving above the government's 1%-3% annual target range for the first time since 2011. The Bank of Israel said it foresaw the rate staying in the target range in the coming year.

At the same time, a rapid COVID-19 vaccination roll-out in which 46% of Israelis have received a third shot has led to an economic rebound, with growth of 8.1% in 2021 that topped the central bank's 6.5% estimate. It projects 5.5% growth in 2022.

The bank noted that while economic growth was strong and unemployment near pre-crisis levels, "the risk of further morbidity cycles remains, and is leading to continued uncertainty regarding the expected intensity of economic activity."

The shekel was 0.4% lower versus the dollar at a 3.215 rate.

All 17 economists polled by Reuters had said they expected the monetary policy committee to keep rates steady, as it has since cutting them from 0.25% at the outset of the COVID-19 pandemic.

Comments

Comments are closed.