A lull in the storm

ISRAEL - In Brief 27 Mar 2023 by Jonathan Katz

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Netanyahu announced on March 26 that the legislation (second and third Parliamentary votes) geared towards changing the judicial system will be postponed until the summer Parliament session in order to try to reach a broadly acceptable compromise. The opposition generally supported this move (although they seek more than a postponement), and the labor unions called off the strike. Much skepticism remains regarding whether it will be possible to agree on a compromise, especially regarding the makeup of the committee to choose Supreme Court judges. If no such compromise is reached towards the summer, we will probably witness a renewed attempt to enact these measures into law. Demonstrations continued into the night, some turning more violent compare to previous ones. Generally, the expected lull in the storm should stem further shekel weakness (and support the long-end of the curve) in the short run, and will be supportive of a moderate 0.25% rate hike next week. We note that in February, unemployment in the important age group (25-64, sa) remained stable at 3.5%, basically remaining at this level for the past five months while the number of employed has increased by 56k (20k in February) while labor participation for this age group has increased steadily from 81.2% to 81.9%. For the BoI, this means we are still close to full employment.