The BoI prepares markets for a tightening cycle

ISRAEL - Report 28 Feb 2022 by Jonathan Katz

1. We have revised our inflation forecast upwards for the coming months due to higher energy prices and a somewhat weaker shekel.

2. The Bank of Israel shifted to a tightening bias last week, preparing markets for tightening in the coming months.

3. We expect three hikes in the coming year, but lower inflation from 2023 on will slow further tightening in coming years.

4. Therefore, we see value at the long-end of the curve; lower bond issuance will also support the long end.

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