Governor of the Bank of Israel Prof. Stanley Fischer has cut the interest rate for October 2011 by 25 basis points to 3%. The move took most analysts by surprise; the consensus was that he would keep the interest rate unchanged. A survey by "Bloomberg" over the weekend found that 19 out of 21 analysts expected the interest rate to remain unchanged.
The Bank of Israel cited the negative turnaround in the global economy for the interest rate cut. It also noted that inflation is back within the target range.
The Bank of Israel said, "Assessments have firmed recently that the slowdown in global growth will be steeper than previously expected. The IMF reduced its forecast of US growth in 2012 from 2.7% to 1.8%, and growth in the eurozone from 1.7% to 1.1%, and it is assessed that the balance of risks is negative."
The Bank of Israel warns, "The more severe global slowdown is reflected in a slowdown in the growth of real activity in Israel, and in particular in the weakness of goods exports. The Bank of Israel has lowered its growth forecast for 2012 from 3.9% to 3.2%, and in the Israeli economy too the balance of risks is to the downside."
The Bank of Israel adds that the rise in home prices remained high in the preceding 12 months, but has been slowing. Home prices rose 12.3% in the 12 months through July, down from 12.5% in the 12 months through June. "The effects of the measures taken by the Bank of Israel with regard to mortgages, changes in real estate taxation introduced by the Ministry of Finance, and the sustained increase in building starts are expected to continue to contribute to this moderation in the coming year."
Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011