Bank of Israel hikes key rate by 0.25 pts to 0.35%, 1st increase since 2018

At the same time, Israel's economy grew 8.2% in 2021, while the jobless rate has fallen to 3.2%. In recent weeks Bank of Israel Governor Amir Yaron and deputy Andrew Abir have prepared the markets for higher rates, saying the cycle would move faster than expected.

The Bank of Israel raised its benchmark interest rate for the first time in 3-1/2 years on Monday, as expected, to combat rising inflation partly caused by robust economic growth and a tight labour market. The central bank lifted its key rate to 0.35% 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.

All 14 economists polled by Reuters had said they expected the monetary policy committee to raise rates, 12 of them predicting a 0.15 point increase. Israel's annual inflation rate reached an 11-year high of 3.5% in February, moving above the government's 1%-3% annual target range. At the same time, Israel's economy grew 8.2% in 2021, while the jobless rate has fallen to 3.2%.

In recent weeks Bank of Israel Governor Amir Yaron and deputy Andrew Abir have prepared the markets for higher rates, saying the cycle would move faster than expected.

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