There's little likelihood that Israel's economy is at the beginning of a recession, according to Bank of Israel economists. The situation in developed nations is not good right now, but Israel's relative strength will enable the country to get through geopolitical crises, the economists added.

These economists recommended that the central bank's governor, Stanley Fischer, leave interest rates unchanged for September.

"At the current interest rate, Israel's monetary policy is still expansionary. Given the increasing signs that the economies in the developed world are slowing, and possibly entering a new recession, it appears that the return to normal interest rates in Israel and the world will be slower than expected a few months ago, and interest rates may even be reduced," according to the bank's protocol from its August 29 meeting on interest rates that was published yesterday.

However, the bank would still do what it could to cool demand for housing, the economists noted. Home prices, they said, were still climbing, albeit at a slower rate than before. Rental prices were up as well, rising some 5.6% over the last year.

The bank's data shows that the Israeli economy is still growing, although more slowly than it had in previous quarters. The slowdown is mostly due to decreased global demand, which affected exports of goods and services. It's possible that the strong shekel also belatedly affected these factors, and now that the shekel is weakening, the effect may be seen in the future.

It's encouraging that local demand was still increasing, they noted, although tax revenues had been lower than expected for the fourth month running.