The shekel continued to strengthen on the foreign exchange market this morning, after the Bank of Israel announced yesterday that its key lending rate would remain at 1% in January. The shekel-dollar rate has fallen 0.3% in comparison with yesterday's representative rate, to NIS 3.4926/$, while the shekel-euro rate has fallen 0.37%, to NIS 4.7791/€.
The Bank of Israel Research Department updated its macro-economic forecast. It expects the interest rate to remain at its present level in the first half of 2014, and to start rising in the second of the year, reaching 1.25% by the end of it. The Research Department sees GDP growth of 3.5% in 2013, 3.3% in 2014, and 3.2% in 2015.
Prico CEO Yossi Fraiman says of the Bank of Israel's interest rate decision: "The Bank of Isreal's decision yesterday evening not to reduce the shekel interest rate, alongside a declaration that the interest rate can be expected to rise by 0.25% by the end of next year is a millstone round the neck of the exchange rate. The foreign exchange market has not waited, and has responded in accordance with the signal from the Bank of Israel that any change in the interest rate will be upwards rather than downwards. This declaration of intent leads one to the conclusion that it is a matter of time before the shekel-dollar rate reaches 3.2, and at the moment there is no-one to stop it."
Published by Globes [online], Israel business news - www.globes-online.com - on December 24, 2013
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