As the expert in the field of international financial law predicted earlier Konstantin Kryvopust,
on Monday, May 22, the Bank of Israel decided to increase the key interest rate by 0.25% to 4.75%.
The expert reminds that this is the tenth rate increase since April 2022.
“The increase in interest rates will lead to a further increase in the price of any loans for citizens and businesses. The average monthly payment on a new mortgage has already jumped by hundreds of shekels since the start of interest rate increases in April 2022. By raising the key rate, the regulator is trying to curb rising inflation. Currently, its annual rate exceeds 5%. The Central Bank intends to reduce inflation to at least 3% per year,” the message reads.
The accounting rate is the most important tool for regulating the economy. Due to its reduction, bank loans become cheaper for both citizens and businesses. This stimulates economic growth: production and consumer demand increase, while inflation rises. An increase in the discount rate has the opposite effect: loans become more expensive, business slows down, consumer demand decreases, and with it, inflation.
As reported K. Kryvopust, in April the Bank of Israel decided to increase the key interest rate by 0.25% to 4.5%. This is the ninth in a row in the last year, since April 2022. The rate hike is happening even faster than predicted. Before that, in January, economists expected the key rate to rise by only 0.25% to 4%.
Also, let’s remind that in October, an increase in inflation by 0.6% was recorded, which supplemented the growth by 5.1% over the last 12 months.
