Governor Stanley Fischer and the monetary policy panel may hold the rate at 2 percent for a second month, according to 14 of the 23 economists surveyed by Bloomberg. Eight forecast a quarter-point cut, and one a half-point reduction. The decision is due at 5:30 p.m. Jerusalem time.
“The Bank of Israel will prefer to wait with the rate cut until the coming months, in order to make sure that the housing market has calmed,” said Alex Zabezhinsky, chief economist at DS Securities & Investments Ltd. in Tel Aviv. “If it wasn’t for the real-estate market, the state of the economy would justify continuing the rate reduction.”
The Bank of Israel has gradually reduced the borrowing rate from 3.25 percent in 2011 in an effort to shore up the economy amid the European debt crisis. The committee left the rate unchanged at the end of November, after an unexpected quarter- point cut the previous month.
House prices rose by 0.5 percent in September-October, bringing the 12 month increase to about 4 percent, the Central Bureau of Statistics reported Dec. 14. Mortgage credit granted for housing purchases jumped 21 percent in November from the previous month to 4.1 billion shekels ($1.1 billion), the Bank of Israel reported Dec. 11.
The central bank announced housing-loan limits at the end of October, the same day it reduced the benchmark rate to the lowest in 22 months. The directives set a maximum loan-to-value for the first time, restricting mortgages to 50 percent for investors, 75 percent for those who have never purchased a home before and 70 percent for everyone else.
“Activity in the housing market has remained lively,” Ron Eichel, said chief economist at Meitav Mutual Fund Management in Tel Aviv. “Apparently, the mortgage market hasn’t responded to the macro-prudential steps taken by the Bank of Israel.”
Growth eased to an annualized 2.9 percent in the third quarter, the slowest in three years, from 3.4 percent the previous three months. Inflation declined to 1.4 percent in November, the lowest since July. The government’s price-rise target is 1 percent to 3 percent.
To contact the reporter on this story: Alisa Odenheimer in Jerusalem at email@example.com
To contact the editor responsible for this story: Andrew J. Barden at firstname.lastname@example.org