Bank Leumi (TASE: LUMI) economists say, "The process of raising the interest rate is not expected to begin in the next few months."
Among their reasons is the composite State of the Economy Index reported this week by the Bank of Israel, who said that business output will continue to fall this quarter as well. The Index fell for the tenth month in a row.
However, Leumi analysts say that a return to an interest rate of 5-6% (2-3% real interest rates) is "only a matter of time". Real interest rates, as calculated by the Bank of Israel interest rate minus the Bank of Israel's inflation expectations, are currently negative. The current real interest rate has averaged -2% in the second quarter. The analysts note, "This interest rate is negative in other countries too."
The analysts say that when interest rates begin to rise, the process "is expected to last for a while, until a return to a normal level."
Published by Globes [online], Israel business news - www.globes-online.com - on June 25, 2009
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