"The probability that the current geopolitical risks will materialize is unknown," states the Bank of Israel in the minutes of the interest rate decision for June, which were published today. In late May, Governor of the Bank of Israel Prof. Stanley Fischer raised the interest rate by 25 basis points to 3.25%.
The Bank of Israel added, "Most of the participants thought that although the level of uncertainty about the pace of the global recovery had risen, it was not expected to have a significant impact on domestic activity in the short term."
Three of the four members of the narrow monetary forum recommended raising the interest rate to reduce inflation, because of the high rate of growth and the approach to full employment. The fourth member, who advised keeping the interest rate unchanged, cited the level of uncertainty about the continued recovery of global economic activity and the increased geopolitical risks.
The participants in the monetary form noted that the inflation environment is still above the upper limit of the target annual inflation range, the midpoint of which is 2%. Inflation over the last twelve months was 4%, and although inflation, seasonally adjusted, was low in the last two months, it is too soon to conclude that this represents a turning point.
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