The Banks of Israel's (BoI) research division has reduced its 2011 GDP growth forecast to 4.8% in its Monetary Policy Report for January-June, published on 2 August, just two months after raising its forecast to 5.2%
The central bank also cut its 2012 growth forecast to 3.9%. The Bank of Israel Research Department forecasts that the unemployment rate will fall to an average for the year of slightly below 6% (down from 6.6% in 2010). The current unemployment rate is 5.7%.
Inflation, as measured by the change in the CPI, over the next four quarters (beginning in the third quarter of 2011) is expected to decline to 2.9%, and over the course of the second half of 2012 to remain within the government's 1-3% target range.
The Research Department estimates that the Bank of Israel interest rate will rise gradually to a level of 3.9 percent in the second quarter of 2012.
According to the forecast, the key contributing factors to the increases in prices, and the increase in the interest rate, during the coming year are expected to be a continued rise in rents and the high level of prices of commodities and energy, which are expected to remain in place over the course of the year.
