• Israel raises its benchmark interest rate by 0.5% in an effort to combat inflation.
•  Increase follows similar steps by central banks in the US and Europe.
•  Annual inflation reached 4.1% in May, exceeding the central bank’s target range of 1% to 3%.

In an effort to bring inflation back within its goal range, the central bank of Israel has announced the largest increase in interest rates in almost a decade.

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The Bank of Israel announced on Monday that it would boost its benchmark interest rate by 0.5 percentage points to 1.25 percent, marking its third consecutive and largest hike since 2011.

The increase follows similar steps by central banks in the United States and Europe in response to rising oil and food prices, which are driving up inflation. While Israel has been less severely affected than many other industrialised nations, annual inflation reached 4.1% in May, exceeding the central bank’s target range of 1% to 3%.

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The Israeli economy is experiencing robust expansion, which is accompanied by a tight labour market and rising prices. The committee has consequently agreed to continue the process of interest rate hikes, according to a statement from the central bank.

“The rate of interest rate increases will be determined in accordance with activity data and the evolution of inflation, so as to continue to support the achievement of policy objectives.”