The Bank of Israel is expected to lower the interest rate tomorrow by 25 basis points to 2.75%, according to most market analysts. A "Bloomberg" survey found that 17 out of 21 analysts believe that the Bank of Israel will lower the interest rate by 25 basis points, whereas only four of them believe that it will be left unchanged at 3%.
The interest rate is expected to be lowered due to worsening falls on financial markets and concerns about a recession in Europe and an economic slowdown in the US in 2012, which would affect Israel's export-based economy.
The "Economist" reports that, "If European leaders and the European Central Bank do not take action quickly, the eurozone will collapse within a few weeks.
"Concern about a negative turn in the eurozone remains mostly due to difficulties that have arisen from formulating a bailout package for countries suffering from the debt crisis," the Bank of Israel's interest rate announcement said last month, when the interest rate was left unchanged. "The level of uncertainty about developments in the global economy has remained very high, and of course creates uncertainty over developments in the Israeli economy."
Data in Israel already show a slowdown in the economy's growth rate. The Bank of Israel published the composite state-of-the-economy index last week, which rose only 0.1% in October. "CPI data from the last few months point to the continuing expansion of the economy, but at a more moderate pace than in the first half of the year," the Bank of Israel reported.
Leader Holdings and Investments Ltd. (TASE: LDER) macro economist Jonathan Katz believes that the Bank of Israel will lower the interest rate to 2.75%, and that it will continue being lowered to 2.25% by the end of March 2012. Katz believes that Israel's growth rate will remain around 2.4% in 2012 due to the global slowdown. The budget deficit is expected to rise in 2012 to 4.2% of GDP, a trend that would require a larger number of IPOs in the upcoming months.
Published by Globes [online], Israel business news - www.globes-online.com - on November 27, 2011
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