Leader: BoI won't rush to raise rate after Fed

"The Bank of Israel will be in no hurry to raise the interest rate, even after the US Federal Reserve Bank raises the rate in the US," Leader Holdings and Investments Ltd. (TASE: LDER) analysts predicted in their macroeconomic review today. They believe that the Bank of Israel Monetary Committee, headed by Governor Dr. Karnit Flug, will act according to total inflation, not core inflation.

The December Consumer Price Index (CPI) will be published on Thursday, and Leader predicts a 0.2% rise. Among the index items, Leader expects rents to continue upwards, regardless of the forecasts.

Leader adds that the January and February indices will drop by a cumulative 1.2%, due to seasonal factors and lower energy costs. They predict that the index will rise 1.2% in the 12 months after February, as a result of higher rents, the effect of the shekel devaluation, and the upward revision of the minimum wage.

The Leader analysts write, "An interest rate hike should not be expected before market inflationary expectations reach 2-2.5%." They add that postponing an interest rate hike in Israel justifies a negligible or even negative premium in the government bond market in comparison with the US.

Published by Globes [online], Israel business news - www.globes-online.com - on January 11, 2015