(Adds January mortgage data)
By Steven Scheer
JERUSALEM Feb 11 Israel's central bank hinted
it was in no rush to lower short-term interest rates further as
officials see economic and price stability but are worried about
rising housing costs, minutes of the latest policy meeting
All six monetary policy members voted to leave the benchmark
interest rate at 1.75 percent on Jan. 28, the
minutes showed. The Monetary Policy Committee (MPC) had cut the
key rate in two of the three prior months due to signs of
economic weakness and concern that loose monetary policy around
the world was propping up the shekel and harming Israeli
In leaving rates unchanged last month, the MPC cited
stability in the economic growth rate - at around 3 percent -
and in unemployment and inflation.
Israel's economic growth is expected to slow to 2.8 percent
in 2013, excluding natural gas production, from 3.3 percent in
2013. The unemployment rate edged up to 6.9 percent in the
fourth quarter of 2012, while inflation is expected to hold near
2 percent this year.
"The level of pessimism in monthly surveys of economic
activity declined and no longer indicates a continued slowdown
in activity," the minutes said on Monday.
At the same time, it appears the risks of deterioration in
the debt crisis in Europe are declining, while concerns over
automatic tax rises and spending cuts in the United States, the
so-called "fiscal cliff" had mostly receded. And while the level
of activity in Europe does not indicate a recovery, data
published in the United States and China were mostly positive,
The shekel has risen to a 15-month high at 3.69 to
the dollar and the Bank of Israel does not see a reversal
anytime soon due to the start of natural gas production in 2013
that will contribute to Israel's current account surplus, while
"continued quantitative easing in the United States, Europe and
Japan supports a strengthening of the shekel."
MPC members expressed concern at the renewed increase in
home prices at a rapid pace along with a fall in building starts
and a rise in mortgage volumes. The central bank said its steps
to limit mortgages in late 2012 should be reflected in upcoming
data but that most of the problem of home prices lay with
"The government has tools to increase the supply of homes
for residence which can act to moderate the increase in home
prices without negatively impacting on the level of activity in
the industry," the Bank of Israel said.
Separately, it noted that mortgage loans by banks fell to
3.97 billion shekels ($1.1 billion) in January from 4.66 billion
shekels in December.
The central bank typically takes interest rate decisions
every month but it said it will no longer make interest rate
decisions around the week-long Jewish holidays of Passover and
Sukkot since data is received with a lag and activity levels are
low due to the holidays.
That means that this year, rate decisions will not be made
in April or September. The rate set in late March will be in
effect for April and May, and the interest rate set in August
will be in effect for September and October.
Depending on the Jewish calendar, Passover falls in March or
April and Sukkot is celebrated in September or October.
"The monetary (policy) committee maintains the authorisation
... to change the interest rate in the inter-meeting periods,
should it deem it necessary," the Bank of Israel said.
The next rate decision will be on Feb. 25.
(Additional reporting by Tova Cohen; Editing by Susan Fenton
and Toby Chopra)