Bloomberg News

Bank of Israel May Reduce Base Rate Next Week, Survey Shows

November 24, 2011

(Updates with additional forecasts in second paragraph.)

Nov. 24 (Bloomberg) -- The Bank of Israel will probably lower the benchmark lending rate next week as Europe struggles to control its debt crisis, according to a survey of economists.

The monetary committee, in its second decision since being appointed in October, will reduce the lending rate by a quarter- point to 2.75 percent, according to 16 of the 20 forecasters surveyed by Bloomberg. Four said the rate is likely to remain unchanged. The Bank of Israel will announce its decision on Nov. 28 in Jerusalem.

“The debt crisis clouding the European economies supports a rate cut,” Ron Eichel, chief economist at Meitav Mutual Fund Management in Tel Aviv, said in an e-mailed report yesterday. “There is also concern regarding geopolitical developments and their effect on the domestic economy.”

The Bank of Israel left its benchmark lending rate at 3 percent on Oct. 24 following a quarter-point cut the previous month, saying it has “room to respond” to events in the global and local economies. Changes in the benchmark rate may be necessary to sustain growth in the Israeli economy, Governor Stanley Fischer said Nov. 16.

The main problem in the global economy is Europe, where there is a chance the euro region may begin to crumble, possibly beginning with Greece, Fischer said on Nov. 15. European growth would be very slow in that case, with a contraction possible, which would affect Israeli exports, he said.

Egyptian protesters calling for an end to army rule clashed with security forces in central Cairo for a fifth night as military pledges for a quicker power transfer to a civilian authority failed to end demonstrations. Israeli Prime Minister Benjamin Netanyahu said yesterday the protests in Egypt may lead to the spread of an “Islamist” influence in Arab countries.

--With assistance from Zoya Shilova in Moscow. Editors: Jennifer M. Freedman, Ben Holland

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net


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