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Goldman Sachs: Bank of Israel will raise interest rates to 4.5%

The analysts predict the PM's failure to pass the budget cut will trigger the move

Analysts at Goldman Sachs investment bank predict Bank of Israel Governor David Klein will soon raise the key lending rate 0.7% to 4.5%.

The bank does not see this happening in the next two months, but believes that by the end of 2002 the interest rate in the market will hit 5%.

Goldman Sachs macro report project the shekel exchange rate will continue to fluctuate, as fiscal policy is still uncertain. They also believe PM Ariel Sharon will not win Knesset approval for the NIS 6.15 billion budget cut, which, along with rising inflation expectations, will trigger the interest rate hike.

In reference to the local stock exchange, the analysts are predicting it will maintain its upswing in the next few weeks at least.

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