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Israel raises interest rates to highest level since 2006

The Israeli economy was also affected by the government’s controversial judicial reform plans earlier in the year, though the situation may normalize following the reform’s pause.
This picture taken on Aug. 23, 2022, shows a view of the exterior of the headquarters of the Bank of Israel.

Israel’s central bank raised rates again on Monday as the country continues to battle high inflation.

The Bank of Israel’s Monetary Policy Committee said it raised rates by 0.25% to 4.75%. The committee cited inflation being “above the target range” at 5% in April, according to a statement.

The Bank of Israel’s target range for inflation is 1-3%.

Why it matters: The Bank of Israel has been aggressively raising interest rates for a year to combat inflation, instituting 10 straight rate hikes since April of 2022. The current interest rate is the highest since the 5.5% set by the Bank of Israel in 2006.

Despite the hikes, inflation continues to rise in Israel. The 5% inflation rate in April is the highest rate since 2009.

Inflation in Israel is relatively tame compared to other countries in the region, however. Inflation in Turkey was above 40% in March, while in Egypt it was more than 30% in April.

Know more: Earlier this month, S&P Global affirmed Israel’s AA- credit rating and stable outlook, indicating the agency’s confidence in Israel’s ability to meet its debt obligations. The decision was notable due to the controversial judicial reform that Prime Minister Benjamin Netanyahu paused in March. The reform created an economic fallout, with many startups leaving the country and Moody’s downgrading Israel’s credit outlook as a result.

Netanyahu convinced S&P that he would not push the judicial reform again in the same form ahead of the rating decision, according to the Israeli news site Calcalist.

In March, Fitch likewise affirmed Israel’s A+ rating and stable outlook.

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