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May 24 (Bloomberg) -- Bank of Israel Governor Stanley Fischer may leave the benchmark interest rate unchanged for a second month as economic growth slows and the European debt crisis shakes global financial markets.

Fischer is likely to leave the rate at 1.5 percent, according to 14 of the 18 economists surveyed by Bloomberg. The other four expected a quarter-point increase. The decision by the Jerusalem-based bank will be announced at 5:30 p.m. local time today.

“The global turbulence will influence the decision more than domestic factors,” Ron Eichel, chief economist at Tel Aviv-based Meitav Securities & Investment Ltd., said in a telephone interview. “There is uncertainty regarding global growth and therefore he will have to wait.”

European and U.S. stocks tumbled last week on concern that the European sovereign-debt crisis will cause a worldwide economic slowdown. Signs that Israeli growth may be moderating also support a decision to hold rates, Rafael Gozlan, chief economist at Tel Aviv-based Leader Capital Markets Ltd. said in a report yesterday. Exports make up about half of the Israeli economy.

Fischer has raised the key rate by a percentage point since August as the Israeli economy recovered from the impact of the worst global recession since the Great Depression. The Bank of Israel boosted its growth forecast to 3.7 percent from 3.5 percent in April.

Growth unexpectedly slowed to an annualized 3.3 percent in the first quarter, from 4.8 percent in the previous three months, as exports fell.

Key Index

The Bank of Israel’s state of the economy composite indicator had its smallest gain for more than a year in April, as a drop in exports partially offset a rise in manufacturing and retail sales, the central bank said May 20. The figure signals a “slower pace” of economic recovery, it said.

Israel’s benchmark TA-25 stock index has slid by more than 6 percent in the past month, led by Discount Investment Corp., which has interests in banking and telecommunications.

The uncertainty over global growth has pushed down the price of commodities such as oil, which has dropped 18 percent this month. That’s likely to help reduce Israel’s inflation rate. Inflation slowed to 3 percent in April, within the government’s target range of 1 to 3 percent for the first time since October.

“Import prices are expected to be gradually adjusted downward, raising the likelihood of lower inflation in the coming months,” Gozlan said. The relative strength of the shekel will also help support a “lower inflationary environment than previously thought.”

The shekel has strengthened about 12 percent against the euro this year, and was trading at 4.7711 at 9:53 a.m. in Tel Aviv. It has weakened by about 0.7 percent against the dollar during the same period, and was trading at 3.8191.

Gozlan forecasts that inflation will slow to 1.9 percent in 12 months’ time.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at

To contact the editor responsible for this story: Peter Hirschberg at

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