The Bank of Israel just announced that interest rates will remain unchanged this month at 0.5%.
This move had been expected as we have started to see inflation pick up, and the BOI was gun shy about cutting rates even more in the face of inflation.
No economic growth, a stable currency, and yet the March CPI figure jumped by 0.5%.
According to Ynet: ” The Consumer Price Index (CPI) rose by 0.5% in March compared to February, the Central Bureau of Statistics (CBS) said Tuesday, following four months of price reductions in light of the recession. Analysts were surprised by this figure in light of pre-estimations pointing to a stable CPI or a price-hike of up to 0.2%. Since the beginning of the year, the CPI has fallen by 0.1% on the backdrop of rise in unemployment, the cutting down of production and the drop in demands.”
The jump was led by higher fuit and vegatable prices as well as higher housing costs. This will surely mean that BOI head Stanley Fischer will hold interest rates steady for the time being.
If we see continued higher CPI readings we may start seeing higher interest rates. That could delay any Israeli economic recovery.
The Bank of Israel has just lowered interest rates by 0.75%, to a record low of 1%. This is a sign that they think that the Israeli economy is slowing much faster than originally thought. The Shekel is actually trading slightly higher in after hours trading on the news.
With interest rates in Israel already at their lowest point in history, it appears that bank of Israel head Stanley Fischer is getting ready to cut rates dramatically lower.
According to a report in Globes: “Capital market sources expect Bank of Israel Governor Stanley Fischer to announce next week that he is cutting interest rates by another 50 basis points. These sources feel that the deepening recession, deflation and the aggressive lowering of interest rates by other countries worldwide will give Fischer no choice but to make an additional interest rate cut in order to encourage exports.”
This would bring rates down to just 1.25%. That seems great for people looking for loans, except that the local banks aren’t lending, and in cases when you can get a loan the capital and collateral requirements are cumbersome.
Not to say ” I told you so” but the fact that Fischer is finally waking up to the economic reality on the ground is something we have been harping about for 4 months( Here is a link from November where we warned on what was going to happen). Why was the public deceived by the powers that be, as to the real state and outlook of the Israeli economy, and why is no one demanding accountability?
