Bank of Israel sees negative inflation again in 2015

Karnit Flug

Inflation will only meet the government target in 2016, when the Bank of Israel predicts it will reach 1.7%.

Despite the negligible interest rate, the Bank of Israel Research Department expects negative inflation in 2015. The Bank of Israel today published its Research Department's full forecast for the economy over the next two years. The document was presented to the Bank of Israel Monetary Council, headed by Governor Dr. Karnit Flug, at its recent discussion of the interest rate, and important particulars from it were published by the Bank of Israel the same day.

A perusal of the full forecast shows that the Research Department expects minus 0.1% inflation in 2015. In other words, inflation will be more than 1% lower than the lower limit of the 1-3% inflation target set in the Bank of Israel Law. Inflation will only meet the legal target in 2016, when it is projected to reach 1.7%.

In addition, as already announced by the Research Department, it expects the Bank of Israel interest rate to remain at 0.1% until the end of the year, rising to 0.75% in 2016. Economic growth is projected to total 3.2% in 2015 and 3.5% in 2016.

According to the Bank of Israel forecast, the chief source of higher growth in 2015 will be recovery in investments, which fell 1.7% in 2014. The Bank expects investment in fixed assets to grow 2% in 2015 and 7.2% in 2016. Private consumption will continue to constitute one of the main growth engines, rising 3.2% in 2015 and 3.3% in 2016.

Unemployment will remain at its current low level of 5.5% in 2015, and will drop to 5.3% in 2016.

Published by Globes [online], Israel business news - www.globes-online.com - on March 29, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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