* Lowers 2014 economic growth estimate to 2.9 pct from 3.1
* Keeps 2015 growth forecast of 3.0 pct
* Bank's economists see key rate doubling to 1.5 pct in 2015
* Shekel appreciates to 3.445 per dollar, near 3-year peak
(Adds details, analyst comments, shekel reaction)
By Steven Scheer
JERUSALEM, June 23 The Bank of Israel trimmed
its 2014 growth estimate on Monday following a
weaker-than-expected start to the year but left its benchmark
interest rate at 0.75 percent.
The central bank, which has kept rates on hold since a cut
in February, said a disinflation trend persisted. It expects
annual inflation to ease below 1 percent in the coming months
before moving back to within the government's target of 1-3
percent in the next 12 months.
"It's possible the Bank of Israel is saving the rate cut for
this drop," said Ori Greenfeld, chief economist at the Psagot
brokerage, predicting another reduction in interest rates in the
next few months.
Inflation held steady at 1 percent in May and the central
bank expects it to average 0.4 percent in the fourth quarter
before rising to reach 1.8 percent at the end of 2015.
Despite a revision to first-quarter economic growth - to an
annualised 2.7 percent from an initial 2.1 percent - the bank
said it was still below forecast. And "there are signs of
moderation in the growth of private consumption, and the virtual
standstill in goods exports continues against the background of
moderation in world trade," it said in a statement released
after its policy meeting.
Still, most indicators of confidence and expectations rose
in the past month while the central bank's own economic
performance index gained in May, it said.
Ten of 13 economists polled by Reuters had forecast no rate
move on Monday. The shekel appreciated to a near
three-year peak of 3.445 per dollar, from 3.453 prior to the
Bank of Israel Governor Karnit Flug said this month that
policymakers, who voted 6-0 to leave rates alone a month ago,
were dealing with an unclear picture of the economy.
In keeping rates steady for July, the central bank noted
that housing prices continued to rise in March-April at an
annual rate of 8 percent.
Based on lower global growth forecasts, the bank cut its
2014 economic growth forecast to 2.9 percent from a previous
estimate of 3.1 percent, its second downward revision this year.
Excluding natural gas output, the economy is set to grow 2.6
percent this year.
The bank's staff sees economic growth of 3.0 percent in
2015, unchanged from its previous forecast.
"The expected growth in 2015 is led by exports, which are
expected to grow with the improvement in the growth rate of
global trade, and by investments," the central bank said. "At
the same time, the growth rate of private consumption is
expected to moderate slightly in the next two years."
It sees the unemployment rate rising to 6.2 percent in 2015
from 5.9 percent this year.
Bank of Israel economists forecast the key interest rate
will end this year at 0.75 percent and rise to 1.5 percent by
the end of 2015. However, they are independent of the Monetary
Policy Committee which makes rate decisions.
"This increase is expected against the background of
improved global economic conditions that will be accompanied by
an increase in the global interest rate environment," the bank
For the Bank of Israel's rate decision please click:
For details on the revised growth estimates please click:
(Additional reporting by Tova Cohen; Editing by Susan Fenton)