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COUNTRY INSIGHTS

Inflation remains elevated but likely to moderate in 2025
ISRAEL · Report · 18 Nov 2024

1. Core inflation pushed higher in October due to higher airfares, a volatile item. 2. We view the fiscal package for 2025 as restrictive and likely to dampen household demand. 3. We expect inflation to moderate in 2025, supportive of monetary easing.

Inflation pressures likely to subside in 2025, supporting rate cuts
ISRAEL · In Brief · 17 Nov 2024

Geopolitics: A ceasefire in North still appears likely, but may have to wait for Trump. The ground operation on both fronts is winding down, although missiles and drones continue to land in the extended North of Israel resulting in some damage and casualties. The imminent threat from a ballistic ...

Inflation in October as expected, core accelerates
ISRAEL · In Brief · 15 Nov 2024

Inflation in October as expected, core accelerates In October, the CPI rose by 0.5% m/m (according to consensus, we were leaning towards 0.6%), and remained stable at 3.5% y/y. Core inflation (The CPI excluding energy and fresh produce) accelerated to 3.3% y/y from 3.0% last month, mostly due to ...

Strong export growth is shekel supportive
ISRAEL · In Brief · 13 Nov 2024

Exports surged in recent months. In August-October, industrial exports increased by 15% q/q, with strong growth in sectors identified as mostly defense: Metal products/machinery and transport equipment, but in pharma and chemical products as well. But generally, high-tech exports were up 14%. Imp...

The shekel appreciates on US election results
ISRAEL · Report · 08 Nov 2024

Ceasefires (in Gaza as well as Lebanon) do not appear to be on the immediate horizon. The ground operation on both fronts is winding down, although missiles and drones continue to land in the extended North of Israel, resulting in some damage and casualties. The immediate risk is from Iran, which...

Markets will follow the fiscal approval process closely
ISRAEL · Report · 04 Nov 2024

1. The 4% deficit target has been approved by the cabinet, but the full implementation of adjustments appears unlikely. 2. Optimism regarding a decline in hostilities and a possible ceasefire has supported the long end of the curve, but much will depend on fiscal credibility. 3. Recent econ...

Risk premium declines on optimism regarding a cease-fire, but much will depend on fiscal credibility
ISRAEL · In Brief · 04 Nov 2024

Geopolitics: Israel continues to exchange missile fire with Hezbollah in Lebanon and continues its ground operation. A lower-level war continues in Northern Gaza. Apparently, a cease-fire framework with Hezbollah and Lebanon appears increasingly likely, while the impasse with Hamas continues. The...

MoF releases optimistic GDP forecast in 2025, as basis for tax revenue forecast in the budget
ISRAEL · In Brief · 30 Oct 2024

The Ministry of Finance expects growth of 4.3 percent in 2025 (0.4 percent in 2024), assuming an end to the fighting at the current intensity by the end of the year, and a gradual recovery in 2025. This forecast is more optimistic than that of the Bank of Israel, 3.8 percent, ours (3.4 percent), ...

Markets reflect optimism regarding Iranian de-escalation
ISRAEL · Report · 28 Oct 2024

1. Likely de-escalation vis-à-vis Iran supported markets on Sunday. 2. Markets will react to the 2025 fiscal framework to be decided upon towards the end of the week, which may be disappointing. 3. Rapid monetary growth on the back of fiscal expansion poses an inflationary threat.

Cautious optimism regarding Iran de-escalation fuels markets
ISRAEL · In Brief · 28 Oct 2024

Geopolitics: On Friday night, Israel attacked three different sets of targets in Iran. The primary target, Iran’s anti-aircraft systems, seem to have been largely destroyed. The second set of targets involved missiles that were positioned to strike Israel potentially. Lastly, the operation struck...

Inflation moderation reduces the likelihood of a rate hike
ISRAEL · Report · 21 Oct 2024

1. September’s low CPI print reduces the likelihood of a rate hike in the coming months. 2. The shekel appreciated sharply on Friday following the Sinwar assassination, but a ceasefire could be elusive. 3. Trade data point to both export and import expansion in Q324, but growth in Q424 wil...

Low inflation print reduces the likelihood of tightening in coming months
ISRAEL · In Brief · 20 Oct 2024

Geopolitics: The death of Sinwar, the Hamas leader, was greeted with some cautious optimism regarding a possible ceasefire. Israel continues its ground offensive in Northern Gaza and into Southern Lebanon. Missiles and drones from Hezbollah continue to be fired into Israel at a high intensity. ca...

Downward inflation surprise in September reduces chances of tightening in the near future
ISRAEL · In Brief · 15 Oct 2024

September’s inflation print (-0.2% m/m 3.5% y/y moderating from 3.6%) came in below market expectations of no change (0,0%, ours as well). Core inflation moderated as well to 3.0% y/y from 3.1%. Housing rental price (OER) accelerated slightly to 2.8% y/y from 2.6%. The big surprise came from airf...

The Deputy Governor hints at possible tightening
ISRAEL · Report · 15 Oct 2024

1. Rates remained on hold last week, with the Deputy Governor sounding rather hawkish compared to the Governor. 2. The fiscal deficit pushed higher in September but is expected to reach 7.2% GDP this year. 3. Economic growth accelerated in Q324 (exports especially), with expectations for so...

The Deputy Governor sounds more hawkish than the Governor
ISRAEL · In Brief · 13 Oct 2024

Geopolitics: Israel continues to push on with its ground operation into Lebanon, while missiles into Israel’s North (including the Haifa area) continue at a high intensity. Israel continues to attack parts or Northern Gaza as well. The Israeli retaliation against Iran appears imminent, with the m...

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