U.S. investment bank JP Morgan believes the Bank of Israel will raise its interest rate from the current 0.5% to 4% in 2010, and that the first increases will come in the fourth quarter of this year. The U.S. bank notes that the Bank of Israel was one of the first central banks to lead an aggressive policy of lowering interest rates in the last quarter of 2008, slashing the rate from 4.25% to an all-time-low of 0.5%. JP Morgan expects that Israel will also be one of the first developed country to step back from that policy, as the Israeli and global economy improve.
Bank of Israel Governor Stanley Fischer will start rasing interest rates once it becomes certain that the U.S. economy is back on track, says JP Morgan.
Forecasts state that inflation in 2009 and 2010 is expected to reach the upper boundary of the government's inflation target, about 3%.
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