Research Department Staff Forecast, September 2015

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This document presents the forecast of macroeconomic developments compiled by the Bank of Israel Research Department in September 2015. The forecast was presented to the Monetary Committee on September 21, 2015, during its meeting prior to the decision on the Bank of Israel interest rate for October 2015. According to the staff forecast, gross domestic product (GDP) is projected to increase by 2.6 percent in 2015, and by 3.3 percent in 2016. The rate of inflation over the next year (ending in the third quarter of 2016) is expected to be 0.6 percent. The Bank of Israel interest rate is expected to remain at its current level of 0.1 percent until the first quarter of 2016, and to increase gradually from the second quarter of 2016.
The Bank of Israel Research Department compiles a staff forecast of macroeconomic developments on a quarterly basis. The staff forecast is based on several models, various data sources, and assessments based on economists' judgment.The Bank's medium scale DSGE (Dynamic Stochastic General Equilibrium) model developed in the Research Department—a structural model based on microeconomic foundations—plays a primary role in formulating the macroeconomic forecast The model provides a framework for analyzing the forces which have an effect on the economy, and allows the integration of information from various sources into a macroeconomic forecast for real and nominal variables, with an internally consistent "economic story".
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