Capital market sources believe that the Consumer Price Index (CPI) rose by 0.6% in April 2010, although some sources estimate that the rise was higher, at 0.8%.
However, even the higher estimate is relatively low for this month. Price rises in April are usually among the highest of any month of the year, due to seasonal factors, most importantly Passover. This year, Passover began in late March.
The CPI rose by 1% in April 2009 and by 1.4% in April 2008, which means that a rise of 0.6%, if it materializes, will be quite low in comparison.
Analysts are divided whether Governor of the Bank of Israel Prof. Stanley Fischer will raise the interest rate for June at the end of the month. Last month, he took most analysts by surprise by leaving the interest rate for May unchanged at 1.5%, catching most analysts flatfooted as they had expected an interest rate hike of at least 25 basis points.
The worsening crisis in Europe changed the picture, and now there is now no consensus about the interest rate in Israel. Some analysts believe that Fischer is worried about an assets price bubble and is committed to returning to a "normal" interest rate, positions which support an interest rate hike.
On the other hand, the widespread uncertainty about the economy of Europe, Israel's largest export market, is liable to jeopardize Israel's recovery and growth, which support keeping the interest rate unchanged. Furthermore, the crisis in the euro bloc has caused the shekel, along with other currencies, to appreciate sharply against the euro, which is hurting Israeli exporters.
Published by Globes [online], Israel business news - www.globes-online.com - on May 12, 2010
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