The next Bank of Israel interest rate decision is on November 27. After yesterday's announcement of a 0.5% Consumer Price Index rise in October, which saw annual inflation fall from 3.8% to 3.7%, analysts see the Bank of Israel leaving the rate unchanged at 4.75% and cutting it at the start of January to stimulate Israel's economy after the war ends.
Mizrahi Tefahot chief markets analyst Ronen Menachem said, "The Bank of Israel will leave the interest rate unchanged at the end of the month and wait for the next indices, while continuing to focus on the shekel's movement and a further fall in inflation."
Leader Capital Markets chief economist Yonatan Katz said that the moderating of the inflationary environment supports easing monetary policy in particular because of the high real interest rate (relative to inflationary expectations), and anticipated moderation in economic activity in the coming period and the moderation in inflation abroad (in the US in particular). "At the moment the Bank of Israel is stressing the stability of the shekel and is deterred from lowering the interest rate."
Katz adds, "In our basic scenario, the Bank of Israel will begin to cut the interest rate at the start of 2024." However, Katz says that if the appreciation of the shekel continues, it is very likely that the Bank of Israel will cut the rate at the end of this month.
Israel Discount Bank chief economist Nira Shamir added, "The October CPI combine with the impressive strengthening of the shekel recently, raises the chances of a Bank of Israel rate cut, if not in the next decision, then on January 1, 2024. According to the contracts market there is a 100% likelihood of a 0.25% rate cut in the next three months, and even a further 0.25% by April's interest rate announcement."
Shamir qualifies this by saying, "Before the rate announcement, data will be published next week on the job market in October, job vacancies and the manpower survey, which are of great importance as well as the state of the economy integrated index. This, in addition, of course, to market trends with an emphasis on the foreign currency market."
Published by Globes, Israel business news - en.globes.co.il - on November 16, 2023.
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