The interest rate hike was the first since June 2011 and the first change in any direction in the rate since March 2015.
The Bank of Israel raised its base lending rate for the first time in over seven years Monday, increasing the rate from 0.1 percent at which it had been fixed for over three-and-a-half years to 0.25 percent.
“After a continued rise in inflation since the beginning of 2018, the inflation rate is stabilizing slightly above the lower bound of the target range, and is expected to remain within the target in the coming months as well,” said the BOI’s monetary commission headed by acting governor Nadine Baudot-Trajtenberg who replaced Karnit Flug on November 14.
“Medium-term expectations remained entrenched within the target range. The rise in wages in the economy and the expansionary fiscal policy will support the continued entrenchment of inflation within the target. The main risk to this is the possibility of a sharp appreciation of the shekel,” the commission continued.
“The Bank of Israel continues to monitor developments in inflation, the real economy, the financial markets, and the global economy, and will act to attain the monetary policy targets in accordance with such developments,” a statement added.
The interest rate hike was the first since June 2011 and the first change in any direction in the rate since March 2015, when the BOI cut it to a historic low of 0.1% at which it had been fixed since then.
The dollar plunged by 0.5% to NIS 3.7012 on news of the rate hike.