Foreign banks see Bank of Israel rate cut

Karnit Flug
Karnit Flug

Merrill Lynch sees the Bank of Israel cutting the interest rate to zero in tomorrow's announcement for May.

Leading foreign banks are convinced that the Bank of Israel will lower the country's benchmark interest rate to zero in the next three months and subsequently launch quantitative easement.

Merrill Lynch sees the Bank of Israel Monetary Committee headed by Governor Dr. Karnit Flug cutting the interest rate from 0.1% to zero, when it announces the interest rate for May tomorrow. Merrill Lynch added that, "The Bank of Israel loves to surprise investors so it may well be that the interest rate cut will be postponed."

On the other hand, the Royal Bank of Scotland (RBS) said that it is likely that the Bank of Israel won't cut the interest rate at tomorrow's meeting. But RBS does expect a rate cut in the coming three months. RBS observes that the shekel exchange rate against the world's major currencies is only 0.5% less than when the Bank of Israel cut the rate 15 basis points to its current historic low at the end of February. Furthermore, RBS notes that macroeconomic indicators for March show weakness in export orders, suggesting that the shekel is too strong.

HSBC has repeated its forecast last month that the Bank of Israel will cut the interest rate and launch quantitative easement. HSBC had predcted a bond buying program of between NIS 27-72 billion.

Merrill Lynch sees Israeli interest rate remaining at zero at least until the second quarter of 2016, and that it will only begin rising again in May 2016, and that it will end 2016 on 0.25%. In its previous forecast Merrill Lynch saw 0.75% interest at the end of 2016.

Published by Globes [online], Israel business news - www.globes-online.com - on April 26, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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