Israeli Rates Rise: Inflation Pick-up Cited
Written by: Aaron Katsman | December 24, 2007
Aaron Katsman
www.IsraelNewsletter.com
The Bank of Israel has raised interest rates by 25 basis points to 4.25%. The central bank cited the higher than expected 0.4% rise in the November Consumer Price Index (CPI). With import prices, especially for food, soaring it appears that inflation has become a worry for the local economy. This could dampen potential ’08 stock market gains, as it may take a big bite out of domestic consumption. Many analysts point to continued increasing consumption by the consumer as a major driving force behind both strong economic growth and stock exchange gains for 2008. With inflation bubbling this could be very troubling.
For local Israeli investors looking how to invest to protect themselves against this inflation, they should consider Israeli government CPI linked bonds.
In a disturbing aside, the Bank of Israel added,”The government’s budget surplus since the beginning of the year reached NIS 7.7 billion,” with all due respect what is the government doing with such a big budget surplus. Could it be that the government over-taxed the citizenry? The government isn’t a ”for-profit” organization, and as such, need or should be required, to refund all of that surplus ASAP, to the rightful owners…..the citizens of Israel.
Disclosure: Author’s fund holds no position in any stock mentioned as of 12/21/07.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
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