The Bank of Israel will probably lower its benchmark lending rate tomorrow to a record 0.5 percent as Governor Stanley Fischer seeks to shore up flagging economic growth, Bloomberg reported.
The rate will be cut by half a point from 1 percent, according to seven out of eight economists surveyed by Bloomberg. The other expects a reduction of three-quarters of a point. The Jerusalem-based central bank will announce its decision at 5:30 p.m. local time tomorrow.
"Fischer has hinted he doesn't want to hit zero," said Jonathan Katz, a Jerusalem-based economist at HSBC Holdings Plc. "There are two likely scenarios. One is that he'll cut by 0.75 point and that will be the bottom. The other is that he'll cut half a point and a further quarter point the following month. I think he'll do the latter."
Fischer has reduced the base rate by 3.25 points since the beginning of October as the economy slows and the inflation outlook improves. Inflation, which eased to an annual 3.3 percent in January, will probably fall below the government's 1 percent to 3 percent target this year, according to the bank's latest survey of economists.
The economy will probably contract 0.2 percent this year, its first decline since 2002, according to the Bank of Israel. The bank's index of leading economic indicators fell 1.2 percent in January, its sixth straight decline, the central bank said Feb. 19, saying the trend pointed to a recession.