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Housing, energy costs worry Israel cenbank

Tuesday, April 12, 2011

Persistantly high housing prices combined with rising food and energy costs led the Bank of Israel to raise its benchmark interest rate by a stronger-than-expected half-point last month, minutes of the discussions showed on Monday.

The central bank's governor Stanley Fischer on March 28 increased the key rate ILINR=ECI to 3 percent, higher than market expectations of a quarter-point move. It was the third straight monthly move and ninth since August 2009.

The latest increase was ultimately backed by all four central bank officials although two had initially lobbied for a quarter-point rise plus new macro-prudential measures to reduce risks in the mortgage market.

Annual inflation reached a 4.2 percent rate in February -- above a government 1-3 percent target -- due to rising housing, food and energy prices, "factors which are expected to continue to exert inflationary pressure in the coming year," the minutes said.

Source: Reuters

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