The Bank of Israel today (Monday) left the interest rate in the economy at 0.75%, contrary to the expectations of some market analysts that the Monetary Committee would surprise and lower the interest rate. The Monetary Committee noted the slowdown in the economy, but believes that the depth of the slowdown is still unknown.
""The indicators of real activity added this month indicate moderate growth than estimated in the previous month, but there is uncertainty about the extent of the moderation," the Bank of Israel's interest rate announcement said. "The first estimate for the first quarter indicates a slowdown in growth following the reduction in private consumption and investment, while labor market data continues to indicate an increase in employment and a reduction in unemployment, and there has been an improvement in confidence indicators and expectations for activity. Signs of moderation are also evident in the composite index data, including in exports of goods.".
Capital market analysts were divided in their opinions regarding the interest rate decision. According to a Bloomberg survey, 10 of them expected the interest rate to remain unchanged at 0.75%, while 8 forecasters believed that the interest rate would fall and reach the historic low of half a percent again, as it was in May 2009 - exactly five years ago.
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The announcement read, among other things: "The consumer price index rose in April by only 0.11%, significantly lower than expectations, and inflation in the last 12 months stands at 11% - the lower limit of the target range. The inflation rate in this view is expected to fall below the target range in the coming months, but expectations for the year are within the target range.".
