The Bank of Israel is scheduled to announce the base interest rate for both April and May today, as part of a decision to skip interest rate revisions for May and October. Generally, the central bank sets rates once a month.
Most analysts expect the representative rate to be left at 1.75%, noting that the bank did not cut interest a month ago and the factors that would have supported such a cut are no longer as compelling.
Among the considerations that would persuade the central bank’s monetary committee to leave the rate at 1.75% are first and foremost the fact that cutting rates would increase demand for housing and drive up home prices even further.
Other factors in support of leaving things as they are include a desire to wait until the new Knesset passes a state budget for this year and the relative calm in the international markets.
Arguments in favor of reducing interest rates include the country’s disappointing growth and export figures in recent months and the inflation outlook for the next twelve months, which is well within the official target of 1% to 3%, and is projected at less than 2%.
Another factor in favor of cutting rates is the recent strength of the shekel against the dollar and other currencies. Relatively high interest rates keep Israel’s currency strong and make Israeli exports more expensive for customers abroad.
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