With Ha'aretz and Reuters
Bank of Israel Governor David Klein is expected tomorrow to raise the key interest rate for June by 0.8% to 1.0%, according to government economists.
However, non-governmental sources believe the rate hike could be as much as 1.5%, Reuters reported on Thursday.
The current rate on central bank sources is 4.6%.
The raise will restore lending rates to their level of December, when Klein slashed the rate in one fell swoop by 2% - from 5.8% to 3.8%, precipitating a devaluation of the shekel. The drastic rate cut is widely perceived as a mistake that undermined the Bank of Israel's credibility.
But inflation has since reared its head again to an annualized 8.1%, adding fuel to arguments that a higher key interest rate is justified. The consumer price index climbed by an unexpected 1.5% in April, following the shekel's more than 10% plunge against the dollar after the December rate cut.
Klein's consultations with central bank officials over the rates are expected to continue through today and Monday morning. Bank officials expressed satisfaction with the Knesset resolution of last Wednesday, to approve proposed budget amendments.
But, as they noted, the proposals have yet to pass their second and third rounds of voting in parliament, and then they have to be implemented.