Bank of Israel Governor Prof. Amir Yaron has distanced himself from yesterday aggressive rate hike forecast by the Bank of Israel Research Department.
Following yesterday's decision by the Monetary Committee to keep the interest rate unchanged at 0.25%, the Bank of Israel Research Department surprised economists by maintaining its forecast for an interest rate hike this year and two more hikes next year with interest of 1% by the end of 2020. This despite a u-turn by the US Federal Reserve, which has not only scrapped the rate hikes planned for 2019 but has been speaking about rate cuts.
But in yesterday's press briefing Prof. Yaron said, "Regarding the interest rate path in the forecast, I emphasize that it is not a forecast by the Monetary Committee itself, but by the Department’s economists, who assess that the interest rate will be increased at the end of the third quarter of 2019."
He added, "However, this assessment is based on a large number of parameters regarding which uncertainty is particularly high at this time, and that could change by the next interest rate decision, such as downward surprises in data to be published regarding inflation and growth in Israel, a decline in assessments of future inflation, the risk of a further deterioration in the global economy, changes in monetary policy by major central banks, and the possibility of shekel appreciation - all of these, if they materialize, could lead to an increase in the interest rate occurring at a later date than that in the Research Department’s forecast."
Published by Globes, Israel business news - en.globes.co.il - on July 9, 2019
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