The Bank of Israel (BOI) left its main interest rates steady for a second straight month on Monday, citing faster economic growth in the first quarter and stable inflation.
In a statement the Bank of Israel noted "Data which became available this month indicate that in the first quarter there was some acceleration in the expansion of the economy," The BOI also noted that growth was led by domestic demand and services exports while goods exports were at a virtual standstill. In its statement, the bank noted that inflation expectations in a year's time were below 2 percent - the midpoint of the government's annual target of 1-3%.
The inflation rate edged up to 1.3% in March. Israel this month revised up economic growth for the final quarter of 2013 to an annualized 3.2% rate from a prior estimate of 2.7%. The decision to keep the interest rate for May 2014 unchanged at 0.75 percent is consistent with the Bank of Israel's monetary policy, which is intended to entrench the inflation rate within the price stability target of 1–3 percent a year over the next twelve months, and to support growth while maintaining financial stability.
The path of the interest rate in the future depends on developments in the inflation environment, growth in Israel and in the global economy, the monetary policies of major central banks, and developments in the exchange rate of the shekel.