Bank Hapoalim Sees Israel Rate Hike in One of Next Few Meetings

(Bloomberg) -- The Bank of Israel will probably raise the interest rate in one of its next few meetings, as long as there is no sharp appreciation of the shekel in the meantime, Bank Hapoalim Ltd.’s economic research department said on Sunday.

“The interest rate level is not in the central bank’s comfort zone,” Bank Hapoalim economists said in a research report.

The Bank of Israel held its benchmark rate steady at 0.25 percent on April 8, but cut its economic growth forecast for this year amid a darkening global outlook. The bank has been in a holding pattern since it raised borrowing costs last November for the first time since 2011.

Economic figures for the first two months of the year point to some improvement in growth in the first quarter of 2019, compared with the second half of 2018, in contrast with most developed economies, Bank Hapoalim economists said.

High growth, more expensive oil and expansionary fiscal policy all support a rise in inflation, Hapoalim said. The appreciation of the shekel, which has gained close to 5 percent against the dollar since the beginning of the year, is the only factor cooling consumer prices, it said.

Under new Governor Amir Yaron, the central bank has said it plans to raise rates in a “gradual and cautious” path with the aim of stabilizing inflation around the midpoint of the target range. The Bank of Israel research department forecasts an increase in the rate to 0.5 percent by the end of the third quarter.

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