Israel lifts interest rate by 50 bps to 3% as forecasts show growth

By Susanna Moon

Chicago, March 28 - The Bank of Israel said it raised the benchmark interest rate by 50 basis points to 3% at its March meeting as most economic indicators pointed to expansion.

The GDP grew by 4.6% in 2010 and grew at an annual rate of 7.7% in the fourth quarter.

The bank noted that the Consumer Price Index rose by 0.3% in February to 4.2%, which was more than the average predicted increase.

The average of forecasters' inflation expectations increased to 3.1% from 3% for the next 12 monthly CPI results, according to a bank press release.

Medium- and long-term inflation expectations were steady this month, slightly above the upper limit of the target inflation range.

Forecasters and the Bank of Israel research department staff see inflation staying above the target range for the rest of this year and falling at the beginning of 2012 to the upper target limit.

Based on the Tel Aviv Inter-Bank Offer Rate, the Bank of Israel interest rate in a year's time is expected to be 4.1%, and on average, forecasters' predict that it will be 3.9%.

The bank increased its benchmark interest rate by 25 basis points to 2½% at its February meeting.

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