The Monetary Committee of the Bank of Israel decided at its meeting on May 23 to raise the interest rate by 0.4 percentage points to 0.75%, the biggest jump since April 2011. Following this decision, the interest rate in Israel is now at its highest level since the start of 2014.

The bank stated that the coronavirus pandemic’s effect on the country’s economy has declined significantly, but other global developments are having a negative impact, in particular the Russian invasion of Ukraine and the slowdown in manufacturing activity in China.

The latest economic indicators show activity is now close to pre-pandemic levels. Other reports indicate that the level of demand in Israel for products and services, which is reflected in investment, private and public consumption, shows an annual growth rate of 8.5%.

The annual rate of inflation in April 2022 came to 4%, the highest in more than a decade. The numbers cited above had apparently convinced the committee that the Israeli economy can bear the burden of raising interest rates, in order to cope with inflation.