Stanley Fischer 311.
(photo credit: Bloomberg)
Analysts are forecasting that Bank of Israel Governor Stanley Fischer will raise
the benchmark interest rate by a quarter percentage point to 3.25 percent on
Monday, even though April inflation figures failed to meet
Israel’s 10-year bond yield drops on bets that rates rise
Fischer’s priority: Fighting inflation
Meitav Investment House chief economist Ron Eichel said the
central bank would raise the rate after factoring in inflationary
considerations, rising housing prices, high economic growth and the recent
recovery of the dollar against the shekel.
“Inflation in the last 12
months was higher than the upper limit of the inflationary target and stands at
4 percent, despite the fact that April’s consumer-price index was lower than
market expectations,” he said. The relevant indicators in the real-estate market
show that housing prices will continue to rise, he added.
The CPI rose
just 0.6% last month, far less than the forecasts of 0.8%-0.9%, the Central
Bureau of Statistics reported this week. Inflation has risen by 1.3% so far this
year, and the annual rate of 4% still exceeds the government’s target range of
USG Capital analysts Eli Ben- David and Shai Zakhaim also believe
Fischer will raise the interest rate.
“The dollar has recovered
impressively, but in our estimates there will be no escape from another
interest-rate rise of 0.25% at the end of the month, to a new rate of 3.25%, to
keep up with the rate of inflation,” they wrote in a report.
and Zakhaim also predicted that the dollar would return to its downward trend
against the shekel after it fell back below the NIS 3.50 threshold early
They forecast that the dollar exchange rate would fall to NIS
3.40 within three months and hit NIS 3.30 within six months.
reported Thursday that 10 out of 19 economists it surveyed had predicted a 0.25%
interest- rate rise, while the remaining nine said Fischer would elect to leave
the rate steady for the second consecutive month.
Fischer has gradually
increased the rate from its record low of 0.5% in August 2009, as the economy
has recovered rapidly from the global financial crisis.