OECD: Israel central bank forex interventions risk inflation

The OECD projected Israeli GDP growth of zero this year, 2.3% in 2010 and 3.3% in 2011, with inflation at a 3.3% rate next year
 
The Organisation for Economic Co-operation and Development (OECD) officially published last week its OECD Economic Outlook No. 86 - "2009 Economic Review of Israel".
 
The OECD criticizes Israel's central bank's foreign exchange interventions arguing it risk fuelling inflation and hurting policy credibility. The OECD recommends that the interventions should stop.
 
The OECD projected Israeli GDP growth of zero this year, 2.3% in 2010 and 3.3% in 2011, with inflation at a 3.3% rate next year. But that the unemployment rate could hit 9.2% next year, despite the projected economic growth.
 
The debt-to-GDP ratio looks to rise to 82% in 2010 from 78% in 2008 and then drop slightly in 2011, the OECD said.
 
The OECD expects Israel to meet budget deficit targets of 6% of GDP in 2009 and 5.5% in 2010 but exceed a 3% target in 2011.
 
On fiscal policy, the OECD said Israel was relying on short-term measures to reach deficit and spending goals and described scheduled cuts in corporate and personal taxation for 2010 as 'untimely’.
 
Following the publication of the 2009 Economic Outlook, the Bank of Israel said that the report was prepared well before Governor of the Bank of Israel Prof. Stanley Fischer's hearing in Paris. The Bank added that, following Fischer's Paris hearing, the OECD will revise its criticisms, and that a new report will be released shortly and will include the revisions.