A "Bloomberg" poll of 22 analysts found that 14 of them expect the Bank of Israel to cut the interest rate tomorrow by 25 basis points to 2.25%. The other analysts expect the Bank of Israel to keep the interest rate unchanged.
Analysts say that the global economic slowdown and expansionist monetary policies taken by some key economies, as well as Israel's declining inflation rate, give the Bank of Israel and Governor Stanley Fischer maneuvering room to cut the interest rate.
Latest macroeconomic figures point to a recession in Europe and economic slowdown in the US and China. Federal Reserve Board Chairman Ben S. Bernanke announced a $267 billion extension to Operation Twist to help stimulate the US economy, the People's Bank of China cut its interest rate, and the Bank of Japan expanded its bond purchasing program.
In Israel, the Consumer Price Index (CPI) was unchanged in May, instead of rising by 0.3-0.4% as analysts had expected, reducing the 12-month inflation to 1.6%, below the midpoint of the government's 1-3% inflation target, supporting an interest rate cut.
Barclays Capital noted in its previous review on Israel that, at the previous interest rate decision, one member of the monetary council already advised an interest rate cut, while five opposed it. The monetary council has since become more dovish, and the Bank of Israel will cut the interest rate tomorrow.
Published by Globes [online], Israel business news - www.globes-online.com - on June 24, 2012
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