Summary:

  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it The consumer price index rose by 3.9 percent in 2009, which was above the upper limit of the inflation target. The annual inflation rate exceeded the upper limit of the target for most of the year. The index exclusive of tax hikes on consumer goods went up by 2.8 percent, which was within the upper part of the target range.  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it The higher than targeted inflation rate, despite the serious global crisis, derived from three main factors: price rises resulting from the government's indirect tax hikes, the rapid increase in the housing component of the index, which reflected a rise in rental prices, and an increase in the energy component of the index. The improvement in the economic environment during the year, expansionary monetary policy and the substantial depreciation of the shekel from the middle of 2008 acted against the moderating effect of the crisis on prices.  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it Monetary policy at the beginning of the year was dictated by the serious global financial and economic crisis, to which governments and central banks worldwide reacted with aggressive policy measures. Later in the year, monetary policy was managed against the background of the economy's gradual recovery from the crisis.  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it Serious concern over the potential adverse impact of the crisis on the Israeli economy at the end of 2008 and at the beginning of 2009, and the improvement in the economic environment later in the year, were reflected by the development of inflation expectations for a year ahead. These fell heavily, to below the lower limit of inflation target, and were actually negative during the last quarter of 2008. As assessments regarding the economic environment became more optimistic, from May 2009 inflation expectations reverted to around the center of the target range.  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it Due to the global crisis and the implications for the economy, the Bank of Israel cut the interest rate on its sources heavily, to a minimal level of 0.5 percent in April, and left the rate at this low level until August.  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it In addition to the reduction in the monetary interest rate to the vicinity of its lower bound, the Bank of Israel used other, unconventional instruments in order to help the economy cope with the global crisis. The central bank began daily purchases of government bonds in the secondary market in order to directly influence longer-term interest rates. The Bank also maintained its daily purchases of foreign currency, beyond the amount planned for the purpose of increasing the foreign exchange reserves, a program that started in March2008..  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it In the second half of the year, against the background of an initial rebound in the economy that was characterized by a high level of uncertainty, policymakers were faced with a challenge. They had to adjust the extent of monetary expansion to the improvement in the economic conditions and the rise in the inflation environment while continuing to help the economy recover from the crisis, at a time when central bank interest rates worldwide remained low.  
  • The consumer price index rose by 3.8 percent in 2008, the second consecutive year when it In August, the Bank of Israel began to gradually reduce the exceptional monetary expansion which it had adopted due to the threats posed by the global crisis. Bond purchases ceased as planned, the policy of intervention in the foreign-currency market was changed from fixed purchases to case-specific intervention, and the interest rate for September was raised to 0.75 percent. In December, when indications for the improvement in the economic environment accumulated, the central bank continued to adjust the interest rate, and raised it to 1 percent, increasing it again in January, to 1.25 percent.  
     
     Inflation and Monetary Policy - Full File