Inflation in the second quarter is expected to reflect an annual rate well above the target range.
The Bank of Israel might raise the interest rate for May by 25 basis points because of concerns about rising inflation caused by sharp hikes in prices for fuel and food. The measure would partly reverse the 100-basis point cut in the interest rate made in the past two months.
Governor of the Bank of Israel Prof. Stanley Fischer will announce the May interest rate on Monday. Chances are currently 50/50 that he will keep the interest rate unchanged at 3.25% or raise it to 3.5%.
The Consumer Price Index (CPI) rose by 0.3% in March, confounding analysts' predictions that it would fall by up to 0.3%. Analysts now predict that the CPI will rise by more than 1.7% in the second quarter: 0.9% in April, 0.5% in May, and 0.3% in June. These preliminary predictions do not take into account any further surges in food and fuel prices following the recent jump in the price for a barrel of oil to a record of more than $120 per barrel.
Inflation for the first half of 2008 is now projected at 1.8%, or more than 3.6% in annualized terms, well above the 3% inflation target ceiling.
Published by Globes [online], Israel business news - www.globes-online.com - on April 24, 2008
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