Rates remain on hold, but MPC concerned about further shekel depreciation

ISRAEL - In Brief 04 Sep 2023 by Jonathan Katz
Rates remained steady at the September 4 meeting, with the BoI announcement noting that "Inflation is moderating, but is still above the target range, economic activity in Israel remains at a high level but a number of indicators point to some moderation in growth, the labor market remains tight and in a full employment environment, but the downward trend in the job vacancy rate continues, the exchange rate in the coming months will have an impact on the dynamics of inflation." Rapid wage growth does not appear to be a major concern: “The real wage level increased slightly." There were no surprises in this rate decision or in the announcement. The MPC is concerned about the continuous pressure for further shekel weakening and is aware that due to the base effect, inflation will accelerate in coming months. We see the probability of a hike on October 23rd as fairly strong, (close to 50%) especially depending on the shekel, which today continues to weaken.

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