Recent Economic Developments, 110

17/08/2005
All Press Releases In Subject:
The Economy and Economic Activity

Recent Economic Developments, 110

Overview:

In January–June 2005 (the period reviewed) the increase in economic activity continued, albeit at a slower rate than that which prevailed in 2004. In particular, the rate of growth of exports slowed, and in the first quarter of the year investment in fixed assets declined (Table 1). The continued growth was reflected in the positive trends evident in the labor market: in the first quarter employment rose and the rate of unemployment fell, with a rise in the rate of participation in the labor force. With regard to macroeconomic policy,
fiscal discipline was maintained; the Bank of Israel cut the published (“headline”) interest rate at the beginning of the period, related also to the reduction in Israel’s risk premium, and the short-term interest-rate differential between the NIS and the dollar went down to an unprecedented low level. The Consumer Price Index (CPI) rose in the first half of the year at a rate close to the lower limit of the inflation target. Inflation expectations, after rising at the beginning of the year, remained almost unchanged, slightly below the midpoint of the target inflation range. The upward trend in the money supply persisted as did the liquidation of the public’s asset portfolio.

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