A somewhat dovish 0.5% hike, but much concern regarding fiscal policy

ISRAEL - In Brief 02 Jan 2023 by Jonathan Katz
A somewhat dovish 0.5% hike, but much concern regarding fiscal policy The Bank of Israel pushed rates higher today by 0.5% to 3.75%, as widely expected. The monetary statement had a more dovish tone than in the past regarding inflation, which remains broad-based and impacted by domestic demand but the BoI notes “some moderation in some components”. Economic activity remains strong but has slowed compared to the pace in the 1st half of the year. The labor market remains tight although in recent month there has been some moderation in employment data. Business sector wages continue to expand rapidly (but less so in the hi-tech sector). The BoI Research Dept, increased its inflation forecast for 2023 to 3% (from 2.5%) and sees inflation declining to 2.0% in 2024. Rates are expected to reach 4% in Q423 (previous forecast was 3.5% in Q323). The GDP growth forecast for 2023 was revised down to 2.8% (from 3.0%) reaching 3.5% in 2024 (first time the 2024 forecast was presented). The fiscal deficit will reach 1.8% GDP in 2023 (previously 1.0%) and 2.1% in 2024. In the press conference, Governor Yaron expressed concern regarding the fiscal demands of the various coalition partners (as presented in the coalition agreements). Not all the demands are factored into the BoI fiscal deficit forecast or inflation forecast. He noted that recently the Israel equity market and the shekel have underperformed, hinting that this could have been impacted by political developments. He expressed concern regarding public sector wage agreements. He sees rates at 4% by the end of 2023, remaining high for some time. This rate forecast does not assume higher rates than 4% and then a reduction to 4% b...

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This is prepared for GlobalSource Partners’ clients and may not be redistributed, reproduced, stored in a retrieval system, retransmitted or disclosed, in whole or in part, or in any form or manner, without the express written consent of GlobalSource Partners. This is distributed simultaneously to our website and other portals used by GlobalSource Partners. The information herein was obtained from various sources and is believed to be reliable but GlobalSource Partners does not warrant its completeness or accuracy. Neither GlobalSource Partners nor any Country Analyst, officer or employee accepts any liability whatsoever for any direct, indirect or consequential damages or losses rising from any use of this or its contents.