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Bloomberg: Bank of Israel Holds Interest Rate Amid Economic Improvement

Published on Sep 26 2016 // Business and Financial News, Economy, Market

September 26, 2016, 9:06 AM EDT – The Bank of Israel held its interest rate at a record low as the economy picked up steam, and raised its economic growth forecasts for this year and next.

The central bank’s monetary policy committee left its benchmark interest rate at 0.1 percent for a 20th month, as predicted by all 19 economists surveyed by Bloomberg. The bank’s research department forecast that growth will accelerate this year to 2.8 percent, up from its June forecast of 2.4 percent. Next year the economy will grow 3.1 percent, up from the previous projection of 2.9 percent, it said.

With key economic indicators showing improvement, economists generally expect the central bank’s next move will be a rate increase — but only after the U.S. raises its borrowing costs again. The bank’s research department predicted the interest rate will start rising again toward the end of next year.

 No Rush

After output grew a faster-than-expected 4 percent in the second quarter, the economy looks ripe for higher rates — but there’s no hurry. Inflation in Israel has been negative for 24 consecutive months, due to one-time government measures rather than falling demand, allowing the Bank of Israel to hold tight for U.S. rate rises.

“The interest rate won’t go up for a long time, not only because of the moderate inflationary environment, but also because the expansionary policy worldwide isn’t expected to change,” said Idan Azoulay, head of the mutual funds department at Epsilon Investment House Ltd.

The shekel stayed higher after the rate announcement. Strengthening 0.3 percent to 3.7527 per dollar, it was set for the highest close since May 2 at 4:46 p.m. in Tel Aviv. The yield on the government’s benchmark bonds maturing October 2026 was down one basis point to 1.71 percent……Read More>>

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