The Bank of Israel's interest rate for January 2006: No change. Stays at 4.5 percent

26.12.2005
 
The Bank of Israel’s interest rate for January 2006: No change. Stays at 4.5 percent
 
The Bank of Israel today announced that the interest rate for January 2006 will remain unchanged at 4.5 percent. This decision is consistent with the Bank's continued support of price stability in the context of the government's target inflation rate of between one percent and three percent a year.
The decision not to change the interest rate following the latest increases was based on the following considerations:
  According to inflation expectations derived from the capital market and the assessments of private forecasters, expected inflation for the next twelve months has dropped to slightly below 2 percent, the midpoint of the inflation target. These sources also assess that the Bank of Israel's interest rate will rise to some extent in the course of the next year, due mainly to continued relatively rapid economic growth and the persistent upward trend in inflation rates and the interest rates of central banks world wide.
  The capital markets and the foreign currency market in particular are relatively calm.
  The budget deficit for 2005 is expected to have dropped significantly. This, together with the proceeds of privatization, is expected to result also in a reduction in the burden of the government-debt/GDP ratio, which is higher in Israel than in other countries.
  Real interest rose a little, against the background, among other things, of the rapid expansion of economic activity.
Till now the geopolitical uncertainty has not affected developments in the capital market. The more the decision-makers adhere to the maintenance of the current economic strategy, the greater the chances that the calm in the markets will persist, and that the creation of the conditions essential for long-term growth will continue.
The Bank will continue to pursue the achievement of the government's inflation target, and in this context will support the attainment of the range of objectives of economic policy, particularly in the areas of growth and employment.