Recessionary concerns with a chilling world global outlook and the political uncertainty in Israel do not support raising the interest rate. Nevertheless, when the Bank of Israel Monetary Committee headed by Governor Prof. Amir Yaron meets tomorrow, the need to restrain rising inflation, a widening rate gap with the dollar, a tight job market and an improvement in private consumption are expected to persuade it to raise the interest rate for the third time this year.
The current interest rate is 0.75% after the Bank of Israel raised it from its historical low of 0.1% to 0.35% in April and then by a further 0.4% to 0.75% last month.
Bank Hapoalim chief strategist Modi Shafrir said, "It seems like the Bank of Israel will raise the interest rate by 50 basis points (0.5%) at its coming meeting, in particular due to the sharp rise in US interest rates and the sharp rise in the rest of the developed markets, and the fact that the local interest rate market and forecasters expect a similar rise at the next meeting."
He added, "Beyond the July meeting, the market has priced that the Bank of Israel will raise the interest rate to just above 3% in the next year and it will stabilize more or less at that level."
Published by Globes, Israel business news - en.globes.co.il - on July 3, 2022.
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