Bank of Israel unexpectedly raises rates

Unexpectedly, the Bank of Israel raised interest rates by 25 bps to 1%. While their policy has no relevance for the rest of the world in terms of its impact, the reasoning behind the move is worth a read to glean the thoughts of other central bankers. They said “1 yr forward inflation expectations increased moderately last month, and are in the upper part of the target range,” that this move to raise rates “will help to establish inflation one year ahead firmly within the target range” and Q3 data “indicate recovery in economic activity.” Also, they acknowledge that while economic indicators point to a recovery, uncertainty persists regarding its strength and that “even after this increase,” the “low level” of a 1% rate continues “the accommodative monetary policy.”

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