By CentralBankNews.info
Israel’s central bank cut its benchmark interest rate by 25 basis points to 0.75 percent after a surprise fall in inflation in January, pessimism among consumers and continued strength of the shekel.
The Bank of Israel (BOI), which cut its rate by 75 basis points in 2013, said the decision to cut the rate was consistent with the bank’s aim of entrenching inflation within a 1-3 percent range and it would use its tools to achieve this objective along with encouraging growth and employment while it would continue to keep a close watch on asset markets, including the housing market.
Israeli consumer prices fell by 0.6 percent in January, higher than the 0.2 percent decline expected, pushing down the annual inflation rate to 1.4 percent from 1.8 percent in December. As a consequence, private forecasters reduced their inflation projections to an average of 1.6 percent over the next 12 months while capital market’s expectations were steady at 1.9 percent and inflation expectations derived from banks’ own rates were unchanged at 1.4 percent.
Private forecasters and market interest rates also indicated “some probability” of a cut in rates by the BOI over the next three months while expectations for a cut over the next year are lower and some forecasters even expect an interest rate increase, the central bank said.
