Israeli interest rate dilemma

As Israel emerges from its recession, more problems seem to lurk round every page of economic data.

The latest set of stats show consumers have returned to the shops in droves. Compared this time last year, October 2009 saw a 25%+ rise in the number of TVs and washing machines purchased. Ditto for cars etc, etc, etc.

Put that info together with rosy GDP predictions for 2010 and new incoming tourism,  things are looking pretty. More room for an upward move on interest rates?

And yet, maybe investors know better. The sharp increases in the stock exchange have come to a halt. Local exporters are deeply unhappy at the shekel’s strengthening against the dollar. Unemployment moved up sharply in September. 

Above all, the budget deficit has hit a record high of 39.8b shekels over the past 12 months – a sad high to report. This will fuel fears of future inflation.

Each of these factors pull in different directions on the Bank of Israel’s decision regarding the level of the rate of interest; keep it stable for now or continue to drag it upwards.

Exiting from a recession brings its own conundrums. Most other countries, who are behind in the economic cycle, should beware.

Explore posts in the same categories: Business, Israel

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One Comment on “Israeli interest rate dilemma”

  1. Michael Horesh Says:

    On Wednesday 11.11.09, the Israeli stock market hit a year high, the bst since Sept 08 and the Lehman crash. Much of this year’s boom has been driven by low interest rates, which is beginning to draw to an end. The exchange will need to find to real growth on which to base its potetial.

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