The BoI commits to FX purchases of 30bn USD in 2021

ISRAEL - Report 17 Jan 2021 by Jonathan Katz

Highlights:

Inflation came in slightly below expectations
• The CPI declined by -0.1% m/m (-0.7% y/y); we had expected 0.0%.
• Housing rental prices surprised on the downside.
• Core inflation declined to -0.4% y/y from -0.2% in November.
• The PPI (exc. fuel) declined by to -1.4% y/y from -1.3%.
• Low inflation is mostly due to the 5%-shekel appreciation (against the basket) in 2020 and the impact of the Covid crisis.
• We expect inflation in 2021 to reach +0.8% on the back of a slightly weaker shekel, stronger consumer demand (and higher rental prices), and higher commodity prices.

FX: The Bank of Israel announced on Thursday a commitment to 30bn USD FX purchases in 2021.
• The BoI purchased nearly 21bn USD in 2020, and the shekel appreciated by 5.1%.
• The committed policy is likely to have a modest weakening impact on the shekel to 3.35-3.40 by the end of Q121.
• The Bank of Israel sterilizes the growth in cash (shekels) from FX purchases by allowing the commercial banks to increase deposits at the Bank of Israel.

GDP contraction in Q420 likely to be modest
• Manufacturing exports expanded by 9.5% q/q in Q420, following 1% in Q320.
• Imports of consumer goods increased by 13%; other imports were up 5%.
• The contraction in GDP in Q420 is likely to be moderate, if at all.
• The Ministry of Finance currently estimates that GDP contracted by only 3.3% in 2020; the BoI estimates -3.7%.

Consumer confidence improved sharply in the second half of December on rapid vaccinations.

Vaccinations are proceeding rapidly: The number of infections has stabilized at around 7,500 per day. 2.3 million people have already vaccinated, and 75% of all those ages 60 and above. The government will decide on Wednesday whether to extend the closure for an additional week.

Important data this week: Monday: the broad rate of unemployment for the second half of December. Tuesday: job vacancies (December). Wednesday: Consumer confidence index for the 1st half of January.

Now read on...

Register to sample a report

Register
Sign-in
Forgot your password?
Copyright 2024 GlobalSource Partners. All rights reserved. This report 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 report 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 report or its contents.