Monday, November 26, 2012

Israel holds rate, no inflation pressure, growth moderate

    Israel's central bank left its policy interest rate steady at 2.0 percent, saying inflationary pressures were not visible and the economy is expected to continue to expand moderately in coming months.
    The Bank of Israel (BOI), which last month cut its rates for the third time this year for a total reduction of 75 basis points, said "the level of economic risk from around the world remains high, and with it the concerns over negative effects on the local economy."
    But data point to moderate economic improvement in U.S. and China in contrast to continued recession in Europe and a deterioration in Japan. Inflation worldwide continues to be low and commodity prices are expected to support the current level of inflation.
    The BOI said Israel's Gross Domestic Product expanded by an annual 2.9 percent in the third quarter with private consumption up 3.5 percent and exports up 4.6 percent. But there was a decline of demand for consumer durables, machinery and equipment investment.

    Recent indicators are consistent with the central bank's forecast of 3.3 percent growth this year and 3.0 percent in 2013 with surveys continuing to indicate pessimism and moderate economic activity.
   Israel's inflation rate fell to 1.8 percent in October from 2.1 percent in September, in the midpoint of the bank's 1-3 percent target range, and the bank said inflationary expectations for the next 12 months are also around that midpoint. The BOI forecast 2013 inflation of 2.2 percent.
    The decline in October inflation was due to a sharper drop in housing, fruit and vegetable prices, the bank said.



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