Research Department Staff Forecast, March 2014

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This document presents the forecast of macroeconomic developments compiled by the Bank of Israel Research Department in March 2014. The forecast was presented to the Monetary Committee on March 23, 2014 during its meeting prior to the decision on the Bank of Israel interest rate for April 2014. According to the staff forecast, gross domestic product (GDP) is projected to increase by 3.1 percent in 2014, and by 3.0 percent in 2015. Excluding the estimated effect of natural gas production from the "Tamar" site, the GDP growth rate is expected to improve from 2.5 percent in 2013 to 2.8 percent in 2014 and to 3.0 percent in 2015, in view of an improvement in the global environment and forecasts of a continued trend of improvement in 2014 and 2015. The rate of inflation over the next year (ending in the first quarter of 2015) is expected to be 1.6 percent. The Bank of Israel is expected to leave the monetary interest rate at 0.75 percent—its level when the forecast was compiled—until the end of 2014, and to start raising it at the beginning of 2015, such that the interest rate is expected to reach 1 percent in the first quarter of 2015.