Israeli Rate May Increase on Inflation, Leader Says; Shekel, Bonds Gain

Bank of Israel Governor Stanley Fischer may raise the benchmark lending rate next week after inflation accelerated for a second month, according to Leader Capital Markets Ltd. Ten-year bonds and the shekel gained.

The October inflation rate increased to 2.5 percent from 2.4 percent in September as food and housing prices climbed, the Central Bureau of Statistics said yesterday. Inflation is expected to accelerate to about 2.8 percent in the next 12 months, the central bank said today, citing its latest poll of forecasters.

“The October index seemingly rose within the consensus, though the index composite strengthens the estimation that basic prices are rising,” said Rafael Gozlan, chief economist at Leader in Tel Aviv.

Gozlan expects the Bank of Israel to increase its main lending rate by a quarter-percentage point to 2.25 percent at the next rate-setting meeting on Nov. 22. He’s one of five economists surveyed by Bloomberg at the end of October and in the first half of November who forecast an increase. Ten other economists predict Fischer will leave the rate unchanged at 2 percent for a second month.

Fischer, who increased the benchmark interest rate by a quarter-point to 2 percent in September citing the surge in housing prices, said yesterday the bank will have to react to inflation “at some point but it is not a concern that we have deal with immediately.”

The yield on the 5 percent benchmark Mimshal Shiklit bond due January 2020 slipped 1 basis point to 4.52 percent at the 4:30 p.m. close in Tel Aviv.

The shekel strengthened 0.4 percent to 3.6635 per dollar.

To contact the reporters on this story: David Wainer in Tel Aviv at dwainer1@bloomberg.net;

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net