+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Bank of Israel slashes rates

Feb 23, 2015, 19:51 IST

Advertisement

The Bank of Israel has joined the easing party. 

In an announcement on Monday, the Bank of Israel cut its main interest rate to 0.1% from 0.25%. 

In a statement, the Bank outlined the following reasons as the main drivers of the rate cut:

  • The CPI declined by 0.9 percent in January, against the background of a decline in energy prices, a scheduled reduction in water prices, and a relatively sharp decline in the housing component. The rate of inflation as measured over the past 12 months was negative 0.5 percent, as the decline in energy prices had a direct effect of reducing the CPI by 0.7 percent. The one-off reduction in electricity prices is expected to contribute -0.3 percent to the CPI for February. After the January CPI was published, short term inflation expectations from all sources remained below the target range, and there was a slight decline in longer term expectations toward the midpoint of the target range.
  • In the fourth quarter the increase in the employment and labor force participation rates continued, as did the decline in the unemployment rate and the increase in the number of job vacancies. The high rate of growth in the fourth quarter came against the background of the recovery from the effects of Operation Protective Edge, and primarily reflected growth in public consumption, and growth in exports that continued in January as well in view of the cumulative depreciation since August. Tax revenues continued to increase in January, at a rate similar to that of recent months.
  • This month, the shekel continued its appreciation, strengthening by 2.6 percent against the dollar, and by 3.3 percent in terms of the nominal effective exchange rate. After a depreciation of 10.4 percent between August and December in the effective exchange rate, there has been an appreciation of 7.6 percent since December, so that the cumulative depreciation since August has only been 2 percent. Continued appreciation is liable to weigh on growth in the tradable industries-exports and import substitutes.
  • Inflation rates in major markets continue to decline to very low levels, and this month various central banks implemented additional monetary easing measures. In the US, growth was slightly more moderate than expected, and there is uncertainty regarding the date that the federal funds rate will begin to be raised there.
  • In the fourth quarter, there was an increase of 22 percent in housing market transactions, consisting of purchases by young couples and by buyers upgrading their homes, while the number of transactions involving investors remains stable. The moderate decline in the number of new homes for sale continues, and the rate of mortgages being taken out remains high. Corporate bond market spreads increased slightly this month, but they remain low.

Israel now becomes the latest central bank to cut rates this year, joining the likes of the Bank of Canada, the Reserve Bank of Australia, the Danmarks Nationalbank, and the Swiss Central Bank. 

Reuters' Jamie McGeever has the full rundown of the central banks that have cut rates this year.

Advertisement

It is a long list.

 

NOW WATCH: Nationwide's Super Bowl commercial about dead children is about corporate profits ... in a way that we can all appreciate

Please enable Javascript to watch this video
You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article