Shekel weakens further after low December CPI

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative

Annual inflation of only 0.8% threatens the Bank of Israel's plan for a rate hike in the third quarter of 2019.

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 0.36% against the dollar at NIS 3.683/$ and up 0.23% against the euro at 4.205/€.

Yesterday, the Bank of Israel set the shekel-dollar representative rate up 0.355% at NIS 3.670/$ from Monday's rate and set the shekel-euro rate up 0.074% at 4.195/€.

Last night, 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. 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.

Earlier this month, the Bank of Israel said it plans another rate hike to 0.5% in the third quarter of 2019 followed by three more hikes in 2020 to 1.25%.

Published by Globes, Israel business news - en.globes.co.il - on January 16, 2019

© Copyright of Globes Publisher Itonut (1983) Ltd. 2019

Shekel Photo: ASAP Creative
Shekel Photo: ASAP Creative
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