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COUNTRY INSIGHTS

Inflation expected to accelerate
ISRAEL · Report · 22 Apr 2024

Inflation in March (0.6% m/m 2.7% y/y, following 2.5% last month) was slightly above expectations of 0.5% on average. Core inflation inched up to 2.3% y/y from 2.2% last month but this is due to higher taxation on cigarettes, which contributed 0.17% to the CPI. Core excluding government measure r...

Inflation in March slightly above expectations, but core remains low
ISRAEL · In Brief · 15 Apr 2024

Inflation in March slightly above expectations Inflation in March (0.6% m/m 2.7% y/y, following 2.5% last month) was slightly above expectations of 0.5% on average. Core inflation inched up to 2.3% y/y from 2.2% last month but this is due to higher taxation on cigarettes contributing 0.1% to the ...

Markets shrug off escalation
ISRAEL · Report · 15 Apr 2024

1. So far, markets appeared unfazed by the recent Iranian strike on Israel, including the equity, bond and FX markets. 2. The BoI kept rates unchanged at its most recent meeting due to current elevated geopolitical risks, but expects easing in the coming year. 3. The economy has recovered...

Local markets shrug off recent Iranian missile attack
ISRAEL · In Brief · 15 Apr 2024

Geopolitics: Iran launched a large-scale drone/cruise/missile attack on Israel Saturday night. Some 200 projectiles were fired, 99% were intercepted. Israel’s defense system performed exceptionally well, in addition to cooperation with other allies including the US, UK, and Jordan. The big questi...

Rates on hold, fiscal deficit pushes higher despite strong revenues
ISRAEL · In Brief · 08 Apr 2024

The Bank of Israel maintained present policy rates on hold at 4.5% on April 8 (market expectations were divided). In the press conference the Governor was clear that elevated geopolitical risks and FX stability were key to the decision: “In view of recent developments, which indicate a substantia...

Elevated uncertainty will postpone loosening
ISRAEL · Report · 08 Apr 2024

1. We expect a rate hold decision today on elevated conflict escalation risk and concern regarding expansionary fiscal policy. 2. Economic indicators point to a steady recovery, with construction and incoming tourism still below pre-war levels. 3. Exports of both high-tech services and indu...

The chances of a rate cut on Monday have diminished
ISRAEL · In Brief · 07 Apr 2024

Monetary policy: We have shifted our rate forecast today to hold, due to last week’s weaker shekel and elevated risk for escalation. In addition, we think the BoI is increasingly concerned about the expansionary fiscal policy. The BoI revised macro forecast is expected to reflect a higher fiscal ...

A rate cut next week appears likely, depending on the shekel
ISRAEL · Report · 01 Apr 2024

1. Credit card purchases remain elevated in March, suggesting robust consumer demand. 2. A rate cut appears likely next week, assuming a stable shekel. 3. Initial estimates for tax revenues in March point to another upward surprise.

Rate cut expected next week, assuming limited shekel volatility this week
ISRAEL · In Brief · 31 Mar 2024

Private consumption remains elevated Although domestic real credit card purchases declined by 2% in February, the level of purchases is 3.8% higher than the pre-war level in September (SA). Real-time data from the BoI point to 3% m/m growth in March. This high level of consumption is due in part ...

Despite concern about inflation, shekel appreciation may support lowering the interest rate
ISRAEL · Report · 25 Mar 2024

1. The shekel appreciated last week on optimism regarding a possible cease-fire. 2. Supply side disruptions, strong demand for housing rentals (compared to supply) and an accommodative fiscal policy pose inflationary threats 3. Nevertheless, assuming shekel stability, we see a likely rate c...

Despite inflationary threats in the medium term, conditions likely to support rate cut in April
ISRAEL · In Brief · 24 Mar 2024

In the past week, the shekel strengthened by 1.2 percent against a basket of currencies, but depreciated after the official exchange rate was fixed on Friday. It seems that in the short term, the shekel will continue to respond to the degree of optimism regarding a possible ceasefire. In the past...

The labor market tightens, supportive of wage pressure
ISRAEL · In Brief · 18 Mar 2024

The recovery in the labor market continues In February, the (regular) unemployment rate remained low at 3.3 percent, compared with 3.2 percent a month ago (seasonally adjusted). According to original data, the broad unemployment rate fell to 5.4% from 5.9% a month ago and 10.2% in October. The nu...

Rate cut far from certain despite slowing inflation
ISRAEL · Report · 18 Mar 2024

1. Despite inflation moderation in February, a rate cut in April is far from assured. 2. We are forecasting inflation of 3.2% in the NTM due to an expansionary fiscal policy, higher shipping costs, and an expected acceleration in rental prices. 3. The current account surplus has improved bu...

Next rate decision will hinge mostly on the direction of the shekel
ISRAEL · In Brief · 18 Mar 2024

Inflation continued to moderate in February Inflation slowed to 2.5% y/y from 2.6%, and core to 2.2% from 2.4%. The main item moderating inflation was housing rental prices which decelerated to 2.0% y/y from 3.0% last month. Other items tended to surprise on the upside, both goods and services. I...

Inflation continues to moderate, rate cut in April far from certain
ISRAEL · In Brief · 15 Mar 2024

Inflation continues to moderate, but the devil is in the details Inflation in February (0.4% m/m, 2.5% y/y down from 2.6% in January) was in line with expectations (or a bit at the high end, we were expecting 0.3%). Core inflation (headline excluding energy and fresh produce) moderated to 2.2% y/...

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