Bank of Israel May Hold Rates on Growth Concern: Week Ahead
The Bank of Israel will probably leave its benchmark lending rate unchanged next week, ending a string of four increases, on concern the global credit crisis will slow economic growth.
The bank will hold the rate at 4.25 percent, according to 15 of 17 economists surveyed by Bloomberg, with the rest predicting a quarter point increase. The Jerusalem-based bank will announce its decision at 6:30 p.m. tomorrow.
“We don't expect the bank to raise rates — not because of inflation, which was actually high in August, but because of the situation in the world,'' said Yaniv Hevron, an economist at Psagot Investment House Ltd. in Tel Aviv. The global turmoil “will come to Israel eventually.''
Gross domestic product will probably expand 4.4 percent this year, the slowest since 2003, and growth may slow in 2009 to 2.9 percent, Merrill Lynch & Co. said in a Sept. 12 report before the collapse of Lehman Brothers Holdings Inc. set off a new round of turmoil in world financial markets.
The Central Bureau of Statistics will provide its preliminary estimate for 2008 GDP growth on Sept. 24.
While annual inflation has been above the government's target of between 1 percent and 3 percent since November, reaching 5 percent in August, the pace will probably slow, Migdal Capital Markets Ltd faxless payday advance. said in a Sept. 18 report, citing commodities prices.
Preventing a further deterioration in economic growth is more important than grappling with inflation, Migdal said, and the bank may lower the rate in the first quarter.
Last Week
Last week, the yield on the benchmark 6.5 percent Shahar bond due in January 2016 rose to 5.87 percent from 5.55 percent a week earlier. The shekel gained about 2.6 percent to 3.5150 per dollar as of Sept. 18.
The Tel Aviv Stock Exchange's benchmark TA-25 Index fell 10.8 percent to 842.03. Africa Israel Investments Ltd., the property developer controlled by diamond billionaire Lev Leviev, led the declines, shedding 40.5 percent. Delek Group Ltd., a property and energy holding company, was the next-biggest loser, falling 27 percent.
Foreign Minister Tzipi Livni won the Kadima Party primary Sept. 17 to replace Prime Minister Ehud Olmert as leader. Livni, who won 43.1 percent of the votes cast, defeating three rivals for party leadership, now begin talks to form a new coalition with herself as prime minister.