3Q CENTRAL BANKING: Israel Seen Keeping Rates Steady Through 2015

 
   By Joshua Mitnick 
 

        Bank of Israel Governor Karnit Flug and the monetary committee held the benchmark lending rate steady at 0.1% throughout the second quarter of 2015 to help push the economy's inflation rate back up to the central banks' target range and to boost growth.
        It is likely to stay there this quarter before moving higher next year.
        Explaining the latest decision to keep the bank's benchmark lending rate steady for July as well, Ms. Flug signaled that the Bank of Israel had reached the limits of its monetary expansion polices: inflationary expectations are returning to the central bank's minimum of 1% and economic growth for 2015 is expected to proceed at a modest pace of 3%.
        "The market is starting to understand that the next direction that the interest rate is going to take is up," said Yaniv Hevron, chief economist at Excellence Investment House.
        But the tightening isn't expected to begin before the end of 2015, said Mr. Hevron. That's because the bank still wants to avoid a move that would strengthen the shekel currency against the dollar, thus hurting Israel's export-rich economy.
        Speaking to reporters after the decision was announced, Ms. Flug said Israeli monetary policy can't be disconnected from interest-rate decisions elsewhere in the world. The central bank governor said that it's likely that the expected start of monetary policy tightening in the U.S. will enable a similar trend to start in Israel to allow a return to a "normal" interest-rate environment.
        However, Mr. Hevron said he believes it's still too early for such a hike: "She will raise the interest rates, but not before the U.S."
        Write to Joshua Mitnick at joshua.mitnick@wsj.com
        (END) Dow Jones Newswires

        July 08, 2015 05:59 ET (09:59 GMT)

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