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

Monetary Policy Press Briefing Bank of Israel Dr. Karnit Flug, Governor of the Bank of Israel March 28, 2016 1

Press Briefing, March 28, 2016  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. 2

Press Briefing, March 28, 2016 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. 3

Press Briefing, March 28, 2016  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. 4

Press Briefing, March 28, 2016  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. 5

Press Briefing, March 28, 2016  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 of monetary policy of the central banks on the Israeli economy. 6

Press Briefing, March 28, 2016  The effective exchange rate is stable and still reflects overappreciation.  The Bank of Israel’s policy in the foreign exchange market supports achieving the policy objectives. 7

Press Briefing, March 28, 2016  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. 8

Press Briefing, March 28, 2016 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. 9

Press Briefing, March 28, 2016  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. 10