Bank of Israel raises interest rate for 10th straight time, to 4.75%
Sharon Wrobel is a tech reporter for The Times of Israel.
The Bank of Israel raises its benchmark interest rate for a tenth consecutive meeting, lifting borrowing costs by 0.25 percentage points to 4.75% as it struggles to tamp down inflation growth in recent months.
“Economic activity in Israel is at a high level, and is accompanied by a tight labor market, although there is some moderation in a number of indicators. Inflation is broad and remains high,” the central bank says in a statement citing the reasons for the rate hike. “The tighter monetary policy and moderation of activity abroad are expected to lead to a slowing in the pace of inflation alongside some slowdown of economic activity in Israel.”
The central bank’s move comes after the consumer price index (CPI) for April, a measure of inflation that tracks the average cost of household goods, rose at almost double the rate than was forecast. The April CPI increased by 0.8% — above analysts’ expectations of 0.4% to 0.5% — taking annual inflation over the past 12 months to 5%, according to data released by the Central Bureau of Statistics on May 15. The April CPI monthly reading is the highest since July 2022.
Over the past year, the Bank of Israel has steadily raised its benchmark interest rate from a record low of 0.1%. Despite the moves, inflation has been hovering above 5% in annual terms for more than six months, exceeding the government’s target range of 1% to 3%.
Following April’s high inflation figure, economists at Bank Leumi, Bank Hapoalim and Psagot Investment house strengthened their expectations for borrowing costs to go up to 4.75%. Earlier this month, the US Federal Reserve lifted interest rates by 0.25 percentage points to a benchmark rate of between 5% and 5.25%, up from near zero in March 2022.