Bank of Israel likely to keep base lending rate unchanged

Despite falling consumer prices and a strengthening shekel, the Bank of Israel is expected to hold its base lending rate at 2% for January when it announces its monthly monetary program today at 5:30 P.M. Seventeen out of 23 economists surveyed by Bloomberg News said they expected no change in the rate until the third quarter of next year, at which point the central bank will likely call for a 25 basis-point drop, to 1.75%. The main reason for holding rates steady is the continued run-up of housing prices, which the Central Bureau of Statistics said increased 1.7% over the past three months. A rate cut would likely encourage more people to take out mortgages, exacerbating the trend, economists said. (Oren Freund )

El Al attacks Open Skies agreement

El Al Airlines is attacking the Open Skies agreement Israel and Europe are supposed to sign, which would pave the way for more airline competition on routes between the two destinations. An executive for the carrier, speaking on condition of anonymity, said yesterday the agreement would allow European airlines to use Ben-Gurion International Airport to fly to any destination in Europe, which he said would enable them to use unutilized capacity to capture part of the Israeli market. "The Open Skies agreement in its current form will enable the countries of Europe to export their unemployment to Israel to compete unfairly with Israeli airlines," the executive said. Israel would have no authority to set standards for aircraft maintenance or the quality of pilots serving those flights, he added. (Zohar Blumenkrantz )

Treasury presents new rules to stop erosion of tax benefits

Finance Minster Yuval Steinitz presented the Knesset Finance Committee yesterday with new rules that would reverse the erosion of tax benefits that Israelis working abroad receive, the treasury said. The new rules, which cover both employees of private business and the government, are based on a model of equal tax thresholds, tax rates and exemptions given to Israelis working abroad to those working in Israel. The Finance Ministry said it will increase the maximum deduction taxpayers can take for educational expenses and for medical insurance. The changes come in response to a gradual but significant lowering of tax rates in Israel as well as widening tax thresholds, which left Israelis working abroad paying higher taxes, especially those earning in the range of NIS 12,000 to NIS 14,000 a month, the treasury said. (Zvi Zrahiya )

The world is far less globalized than it was five years ago, but Israel's links are improving, according to the DHL Global Connectedness Index. "After a drop in 2009, Israel's connectedness score has risen over the past two years, reaching the 18th rank worldwide in 2011," the logistics company said in a recently released report. In trade, Israel's ranking climbed to 16 from 18 in 2010 and in information it climbed to third from fifth. In other areas Israel's performance was less impressive: It held at No. 14 for people and fell to 27th from 25th for capital. The DHL Global Connectedness Index, which takes into account international flows of trade, capital, information and people, grew robustly from the report's baseline year of 2005 to 2007, and then dropped sharply at the onset of the financial crisis. Despite modest gains since 2009, global connectedness has yet to recapture its pre-crisis peak, the report said. (TheMarker Staff )