Bank of Israel holds rates on higher inflation

The Bank of Israel held interest rates steady on Monday for the third straight meeting following the re-emergence of price pressures.

Following are the main points of the bank's post-meeting statement.

* Economic activity and the labor market continue to recover gradually. Alongside this, continued geopolitical uncertainty is reflected in the economy’s high risk premium.

* There has been some increase in the inflation environment. Inflation in the past 12 months is 2.8 percent. Inflation expectations and forecasts from the various sources for the coming year increased, and are around the upper bound of the target range. Expectations for the second year and forward are within the target range, in its upper portion.

* In the housing market, home prices continue to increase and the constraints and difficulties in the industry’s activity in view of the war remain significant. The housing component of the CPI increased by 0.6 percent, and the pace of annual increase is 2.7 percent.

* The global economy continued to expand in the first quarter. Inflation remains above central bank targets, and there was an increase in the interest rate path expected by markets.

* National Accounts and employment data point to recovery of the economy in the first quarter, after the sharp decline that occurred with the outbreak of the war. However, the economy is below the trend of recent years, and has not yet returned to the activity level that characterized it before the war.

* In view of the war, the Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity. The interest rate path will be determined in accordance with the continued convergence of inflation to its target, continued stability in the financial markets, economic activity, and fiscal policy.