09.26.12, 20:17–The Bank of Israel’s Research Department on Monday raised its inflation forecast for the next 12 months to 2.6%, compared to a 2.2% forecast at the end of the previous quarter.
The central bank also raised its GDP growth forecast for 2012 from 3.1% to 3.3%. In 2013, the economy is expected to experience a slowdown and grow by just 3%.
“We assess that the taxation steps taken by the government (raising VAT, import taxes and income tax), the continued increase in the housing component, an increase in energy and commodities prices, the significant depreciation of the shekel that took place in the third quarter of the year, and the expected increase in real salaries in the public sector in 2013, will be the main factors in the rise in inflation during the next year,” the bank said in its review.
“In contrast, the continued slowdown in global economic activity will have a restraining effect on inflation due to reduced demand.”
The government has set an annual inflation target range of 1-3%, and it is the Bank of Israel’s responsibility to ensure that the economy meets this target. Senior bank officials tend to support a restraining policy – in other words, raising interest rates or avoiding cutting interest rates even at times of economic slowdown…Read More>>