| 23.5.2005 |
| |
| The Bank of Israel’s Interest Rate for June 2005 Remains Unchanged |
|
| |
| The Bank of Israel today announced that in the context of its monetary program for June 2005 the interest rate will remain unchanged at 3.5 percent. |
| The present level of nominal short-term interest is consistent with an inflation rate close to the midpoint of the government's price-stability target of between 1 percent and 3 percent in annual terms, over time. This is the conclusion derived from the range of indicators regarding expected inflation over the next one and two years: inflation expectations calculated from the capital market, the predictions of various economic forecasters, and the economic models used by the Bank of Israel. |
| These assessments of expected inflation are supported by several indicators pointing to continued stability in the capital and foreign-currency markets: exchange–rate stability and expectations in the financial markets that it will persist; the continued decline of yields in the government-bond market; and Israel's very low and stable risk premium. Concurrently the dollar interest rate is rising, and the differential between it and the NIS interest rate is contracting. |
|
| |
Table 1: Interest Rates in Israel and the US
(Percent) |
|
| |
Central banks’ interest rates |
Yield spread between US and Israel 10-year govt. bondsc |
| |
Israel |
US |
Differential between central banks’ interest ratesb |
| End of year |
Change |
Interest ratea |
Change |
Interest rate |
| 1998 |
|
13.5 |
|
4.75 |
8.75 |
– |
| 1999 |
–2.3 |
11.2 |
0.75 |
5.5 |
5.7 |
–3.05 |
| 2000 |
–3.0 |
8.2 |
1.0 |
6.5 |
1.7 |
–4.0 |
| 2001 |
–2.4 |
5.8 |
–4.75 |
1.75 |
4.05 |
1.6 |
| 2002 |
3.3 |
9.1 |
–0.5 |
1.25 |
7.85 |
6.8 |
| 2003 |
–3.9 |
5.2 |
–0.25 |
1.0 |
4.2 |
3.0 |
| Monthly data |
|
|
|
|
|
|
| 2004 January |
–0.4 |
4.8 |
0.0 |
1.0 |
3.8 |
3.1 |
| February |
–0.3 |
4.5 |
0.0 |
1.0 |
3.5 |
3.5 |
| March |
–0.2 |
4.3 |
0.0 |
1.0 |
3.3 |
3.8 |
| April |
–0.2 |
4.1 |
0.0 |
1.0 |
3.1 |
3.6 |
| May |
0.0 |
4.1 |
0.0 |
1.0 |
3.1 |
3.2 |
| June |
0.0 |
4.1 |
0.0 |
1.0 |
3.1 |
3.0 |
| July |
0.0 |
4.1 |
0.25 |
1.25 |
2.85 |
3.2 |
| August |
0.0 |
4.1 |
0.25 |
1.5 |
2.6 |
3.7 |
| September |
0.0 |
4.1 |
0.25 |
1.75 |
2.35 |
3.8 |
| October |
0.0 |
4.1 |
0.0 |
1.75 |
2.35 |
3.4 |
| November |
0.0 |
4.1 |
0.25 |
2.0 |
2.1 |
3.2 |
| December |
–0.2 |
3.9 |
0.25 |
2.25 |
1.65 |
2.7 |
| 2005 January |
–0.2 |
3.7 |
0.0 |
2.25 |
1.45 |
2.6 |
| February |
–0.2 |
3.5 |
0.0 |
2.25 |
1.25 |
2.6 |
| March |
0.0 |
3.5 |
0.25 |
2.50 |
1.0 |
2.0 |
| April |
0.0 |
3.5 |
0.25 |
2.75 |
0.75 |
2.3 |
| May |
0.0 |
3.5 |
0.25 |
3.0 |
0.50 |
2.1 |
| June |
0.0 |
3.5 |
0.25d |
3.0d |
0.5d |
|
|
| |
| a |
The rate of interest set in the previous month’s monetary program for the month indicated in the table. |
| b |
The risk premium, as measured by the 5-year credit-default-swap (CDS) market for May is 30 basis points, similar to its level at April |
| c |
The yield spread between 10-year Shahar bonds and 10-year US government bonds. |
| d |
The Open Market Committee of the US Federal Reserve is due to convene on 30 June 2005 for its regular review of interest-rate policy. |
| |
|
| |
|
|
| |
Table 2: The Bank of Israel Real Rate of Interest, the Nominal Yield on Treasury Bills and on Unindexed Government Bonds, and the Real Yield on CPI-Indexed Government Bonds
(monthly average, percent) |
|
| |
Bank of Israel rate of Interest |
Yield on 12 month Treasury bills |
Real yield on CPI- indexed 10- year bonds |
Yield on unindexed 10- year bonds |
| Headline rate (simple)a |
Effectiveb |
Realc |
| 2002 December |
9.1 |
9.6 |
7.2 |
7.9 |
5.7 |
10.9 |
| 2003 December |
5.2 |
5.4 |
4.6 |
4.9 |
4.1 |
7.0 |
| 2004 January |
4.8 |
5.0 |
3.8 |
4.7 |
4.0 |
7.0 |
| February |
4.5 |
4.7 |
3.2 |
4.9 |
4.1 |
7.4 |
| March |
4.3 |
4.5 |
3.3 |
4.9 |
4.2 |
7.4 |
| April |
4.1 |
4.3 |
2.7 |
4.8 |
4.3 |
7.6 |
| May |
4.1 |
4.3 |
2.3 |
5.2 |
4.4 |
7.9 |
| June |
4.1 |
4.3 |
2.5 |
5.0 |
4.3 |
7.8 |
| July |
4.1 |
4.3 |
2.8 |
4.8 |
4.3 |
7.8 |
| August |
4.1 |
4.3 |
2.4 |
4.8 |
4.3 |
7.9 |
| September |
4.1 |
4.3 |
2.3 |
4.7 |
4.2 |
7.7 |
| October |
4.1 |
4.3 |
2.2 |
4.8 |
4.2 |
7.6 |
| November |
4.1 |
4.3 |
2.3 |
4.7 |
4.2 |
7.4 |
| December |
3.9 |
4.1 |
2.7 |
4.3 |
4.1 |
7.2 |
| 2005 January |
3.7 |
3.9 |
2.3 |
4.2 |
4.0 |
6.9 |
| February |
3.5 |
3.7 |
1.6 |
4.2 |
3.8 |
6.7 |
| March |
3.5 |
3.7 |
1.5 |
4.1 |
3.7 |
6.6 |
| April |
3.5 |
3.7 |
1.6 |
4.1 |
3.8 |
6.6 |
| May |
3.5 |
3.7 |
1.9 |
4.1 |
3.6 |
6.3 |
| June |
3.5 |
|
|
|
|
|
|
| |
| a |
Announced interest rate in simple annual terms (excluding compound interest). |
| b |
Calculated as the daily compound interest rate, based on the interbank rate (see explanation in BOI |
| |
no. 2, p. 17). |
| c |
The real rate of interest is the effective rate of interest less inflation expectations derived from the capital market. |
|
| |
Table 3: Central-Bank Interest Rates in Several Countries, May 2005
(Percent) |
|
| Advanced countries |
Interest rate (percent) |
| Japan |
0.00 |
| Switzerland |
0.75 |
| US |
3.00 |
| Norway |
1.75 |
| ECB |
2.00 |
| Canada |
2.50 |
| Sweden |
2.00 |
| Denmark |
2.15 |
| UK |
4.75 |
| Australia |
5.50 |
| New Zealand |
6.75 |
| Emerging markets |
| Thailand |
2.25 |
| Taiwan |
1.875 |
| Chile |
3.00 |
| Korea |
3.25 |
| Israel1 |
3.50 |
| Mexico |
9.60 |
| South Africa |
7.00 |
| Brazil |
19.75 |
| Turkey |
14.50 |
| Other developing countries |
| Czech Republic |
1.75 |
| Poland |
5.50 |
| Hungary |
7.50 |
|
| |
| 1Israel's interest rate relates to June 2005 |
|
| |