Merrill Lynch sees pause in Bank of Israel rate hikes

The interest rate is forecast to reach 3.5% by the end of 2011.

Today's Consumer Price Index (CPI) report for July will not put too much pressure on Governor of the Bank of Israel Prof. Stanley Fischer to raise the interest rate, and the rate will hold steady at 1.75% for at least the next two months, according to Merrill Lynch economists.

In their survey, the economists say that July's inflation and second quarter GDP data "leave room" for the Bank of Israel to take a break in its interest rate tightening cycle and assess the global growth outlook.

Market estimates are for tonight's CPI reading to be 0.7-0.8%, and for tomorrow's GDP growth estimates to be around 2.9%, down from the 3.4% in the first quarter.

Merrill Lynch expects two more interest rate hikes this year, in October and December, to bring the interest rate to 2.25%, and forecasts that the interest rate will reach 3.5% by the end of 2011. The next interest rate decision by the Bank of Israel is on August 23rd.

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 - - on August 15, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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