16.12.2009 Uncategorized No Comments

Interest Rates to rise?

Last night the latest inflation figures from Israel were released. It showed inflation had risen by 0.3% in the month of November, meaning that in the last 11 months inflation was at 3.6%.

As we know, inflation target set by the government is 1 – 3%. The only real way of trying to control inflation, and bringing it back in line with the target is to raise interest rates.

Israel was the first country to raise interest rates since the recession began, and interest rates have risen from the historical low of 0.5% to 1%. It is almost certain that Bank of Israel governor Stanley Fischer will have to raise interest rates, but the question is by how much?

My gut feeling is that he will raise rates by 0.5%, but the majority of people will be calling for a 0.25% rise. What I am certain of is that interest rates in December 2010 will be a lot higher than the 1% we are currently seeing.


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