While there is a consensus among Israeli analysts that the Bank of Israel Monetary Committee will raise the interest rate on Monday (November 21), the analysts are split on whether the hike will be 0.5% or 0.75%. Last month the Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, raised the interest rate by 0.75% to 2.75%, which was the fifth rate hike made by the Bank of Israel since April, when it raised the rate from its historical low of 0.1% to 0.35%.
Psagot Investment House chief economist Guy Beitor thinks that the Bank of Israel will raise the rate by 0.75% to 3.5%. "Inflation in Israel has still not reached its peak and in the October Consumer price Index (CPI) how food and housing prices are continuing to climb,"
Taking into account that both the US Federal Reserve and the Bank of England raised the interest rate for November by 0.75%, Beitor concluded, "The October CPI strengthens our assessment that the Bank of Israel will also raise the interest rate by another 0.75%."
But Bank Hapoalim chief strategist Modi Shafrir disagrees and said that while the sharp rise in inflation supports an additional rate hike of 0.75% to 3.5%, he believes that the overall factors supporting taking the foot of the accelerator and making do with just a 0.5% hike at tomorrow's meeting. Among the reasons given by Shafrir is the less hawkish approach taken by the European Central Bank (ECB), the weaker unemployment figures and concern about the world's largest economies and Israel's main trading partners entering recession in 2023.
Shafrir added, "But we maintain our assessment that the Bank of Israel's interest rate will reach a minimum of 3.50% in the current cycle. In our estimation the interest rate will stand at 3.5%-3.75% in the first quarter of 2023."
Published by Globes, Israel business news - en.globes.co.il - on November 20, 2022.
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