The Bank of Israel left its interest rate unchanged at a record low, amid expectations negative inflation will reverse course. The five-member monetary panel, led by Governor Karnit Flug, kept the benchmark rate at 0.1 % on Monday. Seventeen of 22 economists surveyed by Bloomberg had estimate the decision, while the remainder predicted a cut.
There is no justification for further rate reductions with consumer prices expected “to return to positive territory in coming months, spurred by rising real estate prices,” Ori Greenfeld, chief economist at Psagot Investment Home, said last week. If the shekel appreciates 1.5 % against a basket of foreign currencies, however, the Bank of Israel will have to cut rates to protect exports, Greenfeld said.