Bank of Israel raises interest rate by 25 bps to 4.5%, highest since 2007

JERUSALEM (Reuters) – The Bank of Israel on Monday raised its benchmark interest rate by another quarter of a percentage point, the ninth straight meeting it has increased rates amid a battle against inflation that remains above 5%.

The central bank lifted its key rate to 4.5% – its highest level since 2007 – from 4.25%. Last April, policymakers began raising the rate from 0.1% and have been aggressive during a front-loading process, but most analysts believe the tightening cycle is close to over.

Despite the rate hikes, Israel‘s annual inflation rate stood at 5.2% in February, slightly lower than a 14-year high of 5.4% in January but well above the government’s 1%-3% annual target range.

At the same time, Israels economy grew a faster than expected 6.4% in 2022, although growth is expected to slow to below 3% this year amid the steep rate hikes.

A Reuters poll had found that 11 of 12 economists had expected a 25 basis points move, while one other foresaw a 50 basis point hike.

(Reporting by Maytaal Angel)