Fischer Expected to Raise Rates Today

The major argument in favor of raising rates is Fischer's desire to keep a 0.25 percent gap between Israeli and U.S. rates.

Moti Bassok
Moti Bassok
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Moti Bassok
Moti Bassok

Bank of Israel Governor Stanley Fischer will probably raise interest rates today from 4.75 to 5.0 percent. Nevertheless, there is a chance that the governor will choose to put off the rise until March 27 - the day before the U.S. Federal Reserve is expected to raise its rate to 4.75 from 4.5 percent.

The month of February is unusual because of the short period between the publication of the previous month's CPI on February 15 and the announcement of the interest rate decision for March on February 20.

The bank's monthly discussion of the interest rates started yesterday morning and will end around midday today, lasting only two days instead of the usual five.

In yesterday's talks, the bank's experts provided a range of arguments both for and against raising interest rates for March. The governor will have to make his decision this afternoon, and it will be announced at 4:30 P.M.

The major argument in favor of raising rates is Fischer's desire to keep a 0.25 percent gap between Israeli and U.S. rates.

Other factors are the instability and uncertainty arising from the elections, along with the Hamas victory in the Palestinian Authority, the rise in the dollar-shekel exchange rate and worldwide inflationary pressures.

Against the rise in rates are a number of arguments: an expected inflation rate in Israel of under 2 percent over the next 12 months, a stable stock market and the possibility that higher interest will harm growth and employment.

Both industrialists and senior treasury officials object to raising rates. In their opinion, even last month's 0.25 percent rise was unnecessary.



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