Goldman Sachs: BoI won't raise rate before 2023

Amir Yaron Photo: Yonatan Bloom

The US investment bank pours cold water on forecasts that the Bank of Israel will raise interest rates next year.

US investment bank Goldman Sachs does not see the Bank of Israel raising interest rates before 2023, according to a survey seen by "Globes." Goldman Sachs does not see a rate hike next year because, "We think that there is still room for recovery in the job market, inflation is expected to fall next year and the extent of the strengthening of the shekel is expected to be limited." On Thursday the Bank of Israel's Research Department said that the interest rate over the next year would range between the current historic low of 0.1% and 0.25%.

Israel's derivatives market was stormy last week due to activities by foreign funds, which lumped Israel in one block with Poland which unexpectedly raised interest rates. Goldman Sachs analysts were among the very few who foresaw Poland raising interest rates. The US investment bank is now pouring cold water on the scenario of a rate hike in Israel.

The Bank of Israel Monetary Committee kept the rate unchanged at 0.1% but Governor Amir Yaron signals the end of the bond buying program in November-December if nothing extreme happens before then.

Goldman Sachs wrote, "We don't consider it a big surprise because the size of monthly bond purchases has already fallen. Similarly to the previous meeting the Monetary Committee stated that it would conduct an expansionist policy (in the past very expansionist) for a continued period of time but stopped relating to use of "a range of tools" (including interest rates)."

The Bank of Israel was optimistic in its forecast regarding growth due to the fall in the Covid infection rate in Israel and said that there were no concerns about a spike in inflation. Yaron said that inflation in Israel is lower than in other countries and within the Bank of Israel's annual range of 1%-3%.

Published by Globes, Israel business news - en.globes.co.il - on October 10, 2021

Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Amir Yaron Photo: Yonatan Bloom
Amir Yaron Photo: Yonatan Bloom
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