HSBC Says Israel’s Fischer Isn’t Finished Cutting Rates

Bank of Israel Governor Stanley Fischer, who last week unexpectedly cut the benchmark interest rate to a three-year low, may not be done yet, according to Jonathan Katz, an economist at HSBC Holdings Plc. (HSBA)

The monetary policy committee may surprise investors again as soon as next week with another another cut of 25 basis points to 1.25 percent to drive home the message that they are determined not to let the shekel appreciate excessively, Jerusalem-based Katz said in a phone interview. Policy makers next scheduled meeting is on May 27.

“There are no concerns regarding inflationary pressures,” Katz said. “The global environment is looking soft, and we’ve had a global loosening cycle. And if they don’t cut, the shekel will react.”

Central banks overseeing about a quarter of the world’s gross domestic product have cut interest rates this month, spanning the globe from the euro area and Australia to Kenya and Turkey. Fischer, who is stepping down next month after eight-years, has gradually lowered the benchmark rate from 3.25 percent in 2011 to help spur growth in the export-driven economy.

The shekel closed at 3.6670 against the dollar on May 17, the last day it traded, compared with 3.5711 a week earlier, before the Bank of Israel rate cut.

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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