Press Briefing Bank of Israel Dr. Karnit Flug, Governor of the Bank - - PowerPoint PPT Presentation

Monetary Policy Press Briefing

• Dr. Karnit Flug,

Governor of the Bank of Israel

March 28, 2016

Bank of Israel

1

The Bank of Israel recognizes the need to clearly explain monetary policy. Monetary Policy is operating in a complex environment. The decision supports achieving the policy objectives.

Press Briefing, March 28, 2016

2

Since the previous briefing:

 An apparent turnaround in inflation environment.  An acceleration in activity in the fourth quarter; signs of slowdown in the first quarter.  More accommodative monetary policy worldwide.  Continued vigorous activity in the housing market.

Press Briefing, March 28, 2016

3

4

Inflation remained low, against the background of government-initiated price reductions and low energy prices. In recent weeks—an increase in energy prices and in inflation expectations. Later on—Dissipation of the effect of initiated price reductions and the increase in wages will support a return of inflation to the target.

Press Briefing, March 28, 2016

5

Continued moderate growth, similar to the pace of recent years. Growth is being led by private consumption, which is supported by the increase in wages and by the low interest rate. Continuation of the positive picture in the labor market.

Press Briefing, March 28, 2016

6

 Moderation in the emerging markets and in Japan; moderate and stable growth in Europe and the US. The “divergence” is expected to continue, but monetary policy in the main economies is more accommodative. The Bank of Israel will continue examining the effect

• f monetary policy of the central banks on the Israeli

economy.

Press Briefing, March 28, 2016

7

The effective exchange rate is stable and still reflects

• verappreciation.

The Bank of Israel’s policy in the foreign exchange market supports achieving the policy objectives.

Press Briefing, March 28, 2016

8

Still no apparent change in the rate of increase in home prices and the development of housing credit. Action should be continued to increase supply, with an emphasis on high-demand areas.

Press Briefing, March 28, 2016

9

Research Department staff forecast:  Growth forecast similar to the previous forecast—2.8 percent in 2016 and 3.0 percent

in 2017.

 Inflation over the past 12 months is expected to enter the target range towards mid-2017.  The interest rate path expected to be more moderate.

Press Briefing, March 28, 2016

10

The level of the interest rate is in line with the economic environment. Monetary policy will remain accommodative for a considerable time. As of now, there is no need to use unconventional policy

• tools. These can be used at any time as necessary.

Press Briefing, March 28, 2016