Israel hikes interest rates by 0.5% amid rising inflation

JERUSALEM (AA) - The Bank of Israel on Monday raised the benchmark interest rates from 0.75% to 1.25%, in the biggest hike in a decade to battle rising inflation.

In a statement, the bank said the decision to increase interest rates by 0.5% came in light of economic uncertainty that Israel may witness during the coming period.

It noted that the potential slowdown in global economic activity as a result of the Ukraine war, slowing industrial activity in China, and political uncertainty domestically, may have a negative impact on economic activity.

The Israeli government of Prime Minister Naftali Bennett collapsed last week and the country will hold new snap elections on Nov. 1.

Israel’s annual inflation rate reached a fresh 11-year high of 4.1% in May.

The bank extolled the strength of the labor market, and the continuation of economic activity in Israel at a high level, noting that there is a strong job supply in the markets.

The bank forecasts that the GDP for 2022 will reach 5% and 3.5% in 2023, according to the statement.