JERUSALEM (Reuters) – The Bank of Israel on Monday raised its benchmark interest rate by three-quarters of a point, its biggest hike in two decades, in an effort rein in inflation that has topped 5%.
The central bank lifted its key rate to 2.0% from 1.25%, continuing a tightening cycle that began in April when policymakers first raised the rate from 0.1% — an all-time low where it had stayed for the prior 15 decisions since a 0.15 point reduction at the outset of the COVID-19 pandemic.
Israel’s annual inflation rate reached a fresh 14-year high of 5.2% in July, well above the government’s 1%-3% annual target range. At the same time, Israel’s economy grew an annualised 6.8% in the second quarter from the first quarter.
“The Israeli economy is recording strong growth, accompanied by a tight labor market and an increase in the inflation environment,” the Bank of Israel said in a statement. “The (monetary policy) committee has therefore decided to continue the process of increasing the interest rate.”
The central bank has one more scheduled interest rate decision, on Oct. 3, before a Nov. 1 general election.
(Reporting by Ari Rabinovitch; Editing by Steven Scheer)
