More Rate Hikes Ahead

The Bank of Israel (BoI) raised its policy rate 25 basis points (bps) to 2.50% on February 21, as we expected, and we maintain our view that further rate hikes are on the cards (see our online service, January 25, 'Regulations Increase Scope For Rate Hikes'). Our outlook for rising inflation, solid growth, and the shekel underpin our view. We forecast the headline interest rate to come in at 3.25% at end-2011.

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