The Bank of Israel's Monetary program for December 1999

November 22, 1999

Monetary program for December 1999

The Bank of Israel announced its monetary program for December 1999, according to which the Bank’s interest rate is reduced by 0.3 of a percentage point.

The Bank of Israel explained that the decision to reduce the interest rate was taken in the light of recent progress in lowering the inflation environment. This progress was mainly expressed in the gradual and continued reduction in expected inflation for a one-year horizon and beyond-as reflected in expectations derived from the capital market and in various inflation forecasts-to a level close to the path consistent with the attainment of the inflation target of 3-4 percent per year set by the government for the next two years. Furthermore, the rate of increase of the money supply also moderated again, so that it is now compatible with the desired rate. The Bank pointed out that there are still dangers regarding inflation and financial stability which require continued caution in interest policy, based on keeping a close watch on and detailed analysis of the inflation environment.

The Bank of Israel emphasized that it is important that the budget be approved by the Knesset in accordance with the framework and composition set by the government, in order to reduce economic uncertainty and continue advancing towards renewed and sustainable growth. To achieve this, the budget policy should be accompanied by determined implementation of structural reforms which increase competition. All the above forms part of the macroeconomic strategy designed to maintain economic stability, while opening the economy and integrating it into the global economy, providing the impetus to sustainable growth.