Bethel Finances: Harel economist believes Fischer might lower interest rate

www.bethelfinance.com
Bethel Finance news:
Dr. Israel Sarel: If the shekel continues to strengthen, the Bank of Israel could lower interest by 0.25%.

Dr. Israel Sarel: If the shekel continues to strengthen, the Bank of Israel could lower interest by 0.25%.

Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) chief economist Dr. Michael Sarel believes that Governor of the Bank of Israel Prof. Stanley Fischer could actually lower the interest rate for May. He said, "In the event that the present level of the exchange rate and inflation expectations remain the same, then the Bank of Israel could substantially slow down the pace of raising the interest rate over the coming year. More than that, if the shekel will continue to strengthen in the coming weeks, then it is not outside the realm of possibility that the Bank of Israel will decide on April 24 to lower the interest rate by 0.25%."

Dr. Sarel's exceptional assessment regarding the Bank of Israel's interest rate policy stems from the strong response of the capital and foreign exchange markets in the wake of the surprise decision to rate the interest rate by 50 basis points to 3% on March 28. Since then the shekel has strengthened by 2% against the dollar, and by 1% against the euro.

At the same time, the prices of CPI-linked bonds (especially medium-term bonds) have fallen, and medium and long-term inflation expectations implied in the bonds market have fallen by a substantial rate.