Estimates: The decline makes possible a slight interest rate reduction of 0.3-0.5%.
A surprising fall of 1.3% was recorded in the money supply, i.e., cash and current accounts, in March. This followed sharp increases in January (3.4%) and February (2.7%). This emerges from up to date figures published today by the Bank of Israel.
Total money supply grew by about NIS 1 billion in the first quarter, reaching NIS 17.8 billion last month, a rise of 4.8% in comparison with December. Since October the money supply has grown 7.2%. In the last 12 months, the money supply growth was 12.4%.
The growth in money supply recorded in the first quarter of the year is a little higher than the desired rate as derived from the inflation target set by the government (7-10%) plus the growth in economic activity (GNP). The growth over the last 12 months matches the desired rate. It is estimated that the fall in money supply and in inflationary expectations on the capital market make possible a slight interest rate reduction of 0/3-0.5%.