The shekel is strengthening today against the dollar and against the euro. In late morning inter-bank trading, the shekel-dollar exchange rate is down 0.44% against the dollar at NIS 3.617/$ and down 0.48% against the euro at 4.161/€.
Yesterday, the Bank of Israel set the shekel-dollar representative rate down 0.192% at NIS 3.633/$ from Friday's rate and set the shekel-euro rate down 0.153% at 4.182/€.
This afternoon at 4pm. The Bank of Israel Monetary Committee will announce its interest rate decision for November. This will be the last decision by Governor of the Bank of Israel Karnit Flug who heads the committee and whose term of office ends next month. Analysts are divided as to whether the committee will raise interest rate, which has been anchored at an historic low of 0.1% since March 2015.
15 central banks in the world raised their interest rates in September including the US Fed. The widening interest rate gap between the shekel and other foreign currencies, especially the dollar, puts the Bank of Israel under pressure to hike the interest rate.
Psagot Investment House chief economist Ori Greenfeld believes that Flug and the committee will not raise the interest rate, among other things because it is the Monetary Committee's last meeting under her leadership. "There are question marks about whether it is right for a Governor of the Bank of Israel to take such a drastic step before leaving. The message that it is important for the Bank of Israel to deliver is that the interest rate decision is not one by any particular Governor; it is a decision by the Monetary Committee," he says.
Greenfeld believes that the interest rate will be raised in November, based on a prediction by the Bank of Israel Research Department of one interest rate hike in 2018. "The meeting in November will be the last one this year, and it appears likely that the Monetary Committee will prefer waiting until the end of the year."
Published by Globes [online], Israel business news - en.globes.co.il - on October 8, 2018
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