Key Israeli Lending Rate Lifted Another 25 Basis Points

January 24, 2011

The process of gradual interest rate normalization took another step today in a move that analysts mostly anticipated.  This was the seventh increase so far but the first in four months.  All of the hikes have been by 25 basis points.  The first in August 2009 was the initial increase by any central bank following the world recession.  Two more moves followed in late 2009, and three were implemented during 2010.  A statement from the central bank repeated the prediction that CPI inflation, although at an in-target 2.7% in December, will be spending most of 2011 above the 1-3% prescribed range.  Officials also observed that expected inflation is either at the target ceiling according to survey measures or above such according to inferred capital market signals.  Economic growth remains sound, and house price inflation is excessive at 17.3%.  Such continues to accelerate and is being funded by sharply higher mortgage finance.  There will no doubt be more Israeli rate hikes in 2011, the timing of which will depend upon future economic and financial market trends.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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