The shekel is weakening today against the dollar and against the euro. In late morning inter-bank trading, the shekel-dollar exchange rate is up 0.24% against the dollar at NIS 3.687/$ and up 0.36% against the euro at 4.204/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.218% at NIS 3.678/$ from Tuesday's rate and set the shekel-euro rate down 0.141% at 4.189/€.
After raising the interest rate from a historic low of 0.1% to 0.25% in December, the Bank of Israel said earlier this month that it plans another rate hike to 0.5% in the third quarter of 2019, followed by three more hikes in 2020 to 1.25%.
However, since then the Central Bureau of Statistics reported that the Consumer Price Index for December was minus 0.3%, at the lower end of the analysts' predictions. This means that inflation in 2018 was 0.8%, below the Bank of Israel's target range of between 1% and 3% annually. This puts into question the Bank of Israel's ability to raise interest rates later this year and thus close the interest rate gap between the shekel and the dollar.
There was good news for the Israeli economy yesterday, with the Central Bureau of Statistics revising upwards its GDP growth figure for the third quarter of 2018 from 2.1% to 2.3%, on an annualized basis.
Published by Globes, Israel business news - en.globes.co.il - on January 17, 2019
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