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Israel: Biggest rate hike since 2002

The Bank of Israel raised its key interest rate by 75 basis points today, the biggest hike in 20 years, and appeared poised for further hikes as part of its efforts to curb inflation’s rally above 5%.

Specifically, the central bank raised its interest rate to 2.0% from 1.25%, continuing the tightening cycle it set in motion last April, when officials made the first hike from a record low of 0.1%.

The probability of an increase of 75 bp. rose last week after data showed the economy grew at a robust 6.8 percent in the second quarter, while annual inflation climbed to 5.2 percent in July. This is the highest level of inflation since October 2008.

Central bank officials also announced today that they are determined to drive inflation back to the annual target of 1% to 3%.

The last time the Bank of Israel raised its interest rates by 75 bp. it was mid-2002.

Source: Capital

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