Merrill Lynch analysts expect the Bank of Israel to leave the interest rate unchanged at its historic low of 0.5%, when it announces its upcoming decision on Monday.
At the same time, the analysts point out that inflation expectations continue to move higher, and early signs of an economic recovery in the second half of the year are growing stronger. Merrill Lynch figures that interest rate hikes "will be on the table" for the fourth quarter. Other factors pointing to higher interest rates are the "expansionary" 2009-10 budget, and implementation of a more active fiscal policy in the second half.
Merrill Lynch believes that Israel will be the first EEMEA (Eastern Europe, Middle East, and Africa) country to hike rates.
Merrill Lynch was bought by Bank of America in 2008 and is now a wholly-owned subsidiary of the bank.
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2009
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