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Bank of Israel More than Doubles Key Rate to 0.75% in Second Hike in Two Months

May 24, 2022

by: Gad Lior ~ Ynetnews

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Israel’s inflation is expected to continue rising over the next few months amid the global spike in oil prices.

Tuesday, 24 May 2022 | The Bank of Israel more than doubled its benchmark interest rate on Monday in the second hike in as many months in a bid to combat fast-rising inflation.

The central bank lifted its key rate to 0.75% from 0.35%, a month and a half after a previous 0.25% rise.

The increase, which comes amid growing fears among some that Israel is on the verge of a recession—was brought on by the accelerated inflation in Israel, which has gone beyond 4% in 2022, despite the bank’s original 1.6% forecast.

According to analysts, the country’s inflation will most likely continue to rise over the coming months, especially as the price of fuel is expected to rise again on June 1 due to the global hike in oil prices.

Analysts further estimate that Israel will see at least two more rate increases in 2022, and that in a year, the basic interest rate of the Bank of Israel will stand at 1.5% and perhaps even higher.

This means that the prime interest rate will jump within a year from 1.6% to 3% and more, meaning that Israel’s notoriously high cost of living is only expected to get worse.

While the intensity of the hike caught some analysts by surprise, Israel has actually held off raising interest rates.

In the UK, the central bank has already raised its interest rates four times in five months, while the US raised its interest rate two months ago, first from 0.25%–0.5% and then again to 0.75%–1%.

One of the reasons for the high global inflation is the war in Ukraine, which caused a significant hike in the price of raw materials, some of which rose by 100%–200%.

The global interest hikes themselves are aimed at preventing a mounting rise in prices brought on by two years of COVID and the consequent freeze of some economic activities, which reopened in full force only in recent months.

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Editor’s Note: The further hike in key rates is devastating news to the already impoverished Israelis on our Food Program. These needy families, new immigrants, single mothers, Holocaust survivors and widows are struggling to make ends meet as it is, and often have to make the heartbreaking choice between putting food on the table or paying rent. As prices and rates soar, we want to help them weather the tough times. Will you help us help them? Please donate generously to our Food Project to ensure that they do not go hungry. 

Posted on May 24, 2022

Source: (This article was originally published by Ynetnews on May 23, 2022. Time-related language has been modified to reflect our publication today. See original article at this link.)

Photo Credit: RJA1988/pixabay.com

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