Bank of Israel holds rates, sees significant risks to global economy

JERUSALEM: The Bank of Israel held its benchmark interest rate at 0.25% for a fifth straight decision on Monday, citing significant risks to global activity, while the local economy remains solid and with rising inflation and a tight labour market.

All 12 economists polled by Reuters had forecast rates would remain unchanged again. A surprise hike in November was followed by no change in January, February, April and May.

"The risks to the global economy remain significant, and the forecasts for world trade and growth in most regions were revised downward," the central bank said in a statement. "The expectation in global financial markets is that major central banks will renew the process of monetary accommodation."

It noted that the path of Israeli interest rates will be gradual and cautious, in a manner that supports moving inflation back to around 2% -- the middle of the government's 1%-3% target.

Annual inflation edged up to a 1.5% rate in May from 1.3% in April and the central bank expects the rate to stay around 1.6% through 2020.

The bank's own economists project a quarter-point increase in the benchmark rate to 0.5% in the third quarter, with two more moves in 2020 to bring the rate to 1%.