UBS economists have published an updated survey for Israel in which they forecast Bank of Israel Governor Stanley Fischer will cut interest rates by an additional 50 base points in the coming weeks.
The survey notes, "With an eye on our (updated and more optimistic) inflation projection, which sees a decline in inflation to the bottom end of the 1-3% target range in August, we believe Bank of Israel Governor Fischer might decide to cut rates further in order to maximize the monetary stimulus for the slowing economy. We have added another 50 base points of rate cuts to our forecast, which would bring policy rates to 1.25%."
"To be effective, these cuts will have to come in a front loaded fashion. Whether the Bank will cut 50 base points already in the next meeting on 26 January, or in two 25 base point steps in January and February might not least depend on the security situation, which remains in flux. At the time of writing, two 25 base points cut in each January and February look perhaps slightly more likely."
The survey notes that the Bank of Israel has cut interest rates by 250 base points since early October.
Published by Globes [online], Israel business news - www.globes-online.com - on January 11, 2009
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