FX passthrough on inflation accelerates

ISRAEL - In Brief 10 Aug 2023 by Jonathan Katz
The BoI Inflation Report for the 1st half of the year analyzes the inflationary trends and monetary policy for this period. The Report estimates that the judicial overhaul (domestic factors) contributed an additional 10% depreciation of the shekel. The BoI estimates that the FX passthrough on inflation is 10%-20% therefore the spillover on inflation was at least 1%. The Report actually presents a monthly graph of the estimated passthrough in which the passthrough increased gradually during the past year from under 20% to closer to 25% (according to the graph). This upward trend in the passthrough underlines the expected importance of FX in the upcoming monetary decisions.

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