Inflation Reading To Push Back Rate Hikes

Annual inflation was still outside the Bank of Israel (BoI)'s 1-3% target range in January, coming in at 3.8% y-o-y, but the 0.7% m-o-m drop in the consumer price index will probably deter the bank from raising its headline interest rate (currently standing at 1.25%) at its end-February meeting. With the 9.6% cut in consumer electricity prices on February 15, monthly inflation is likely to remain subdued for the time being, meaning that the BoI may not hike rates at its end-March meeting either. We have accordingly cut our end-2010 forecast for the headline rate from 3.50% to 2.50%, and

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