IBI Investment House Ltd. chief economist Ayalet Nir predicts that Governor of the Bank of Israel Prof. Stanley Fischer will raise the interest rate for October by 25 basis points to 2%. She adds that another interest rate hike to 2.25% is likely by the end of the year.
Nir says that Israel's rapid GDP growth in the second quarter, due in part to a sharp increase in private consumption, along with the drop in the unemployment rate, the rise in consumer confidence, and ongoing rise in housing prices, support more interest rate hikes in 2010. Any rate hike will be moderated by signs of an economic slowdown, especially overseas.
Nir predicts that the Consumer Price Index (CPI) for August will rise by 0.3%. She notes that the month was characterized by seasonal rises in prices for fruits and vegetables, health services, and vacations and recreation, among other items. These were offset by lower prices for clothing and footwear, furniture, books and school books, and other items. She took into account that Rosh Hashana (the Jewish New Year) falls in early September this year, so holiday discounts already began in August.
Over the past eight years, clothing and footwear prices have by 3-4.3% in August, and fruits and vegetables prices have ranged between a fall of 1.4% to a gain of 6%. Based on preliminary estimates, Nir expects the CPI to fall by 0.2% in September and to rise by 0.3% in October.
Published by Globes [online], Israel business news - www.globes-online.com - on September 2, 2010
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