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Despite concern about inflation, shekel appreciation may support lowering the interest rate
ISRAEL · Report · 25 Mar 2024

1. The shekel appreciated last week on optimism regarding a possible cease-fire. 2. Supply side disruptions, strong demand for housing rentals (compared to supply) and an accommodative fiscal policy pose inflationary threats 3. Nevertheless, assuming shekel stability, we see a likely rate c...

Despite inflationary threats in the medium term, conditions likely to support rate cut in April
ISRAEL · In Brief · 24 Mar 2024

In the past week, the shekel strengthened by 1.2 percent against a basket of currencies, but depreciated after the official exchange rate was fixed on Friday. It seems that in the short term, the shekel will continue to respond to the degree of optimism regarding a possible ceasefire. In the past...

The labor market tightens, supportive of wage pressure
ISRAEL · In Brief · 18 Mar 2024

The recovery in the labor market continues In February, the (regular) unemployment rate remained low at 3.3 percent, compared with 3.2 percent a month ago (seasonally adjusted). According to original data, the broad unemployment rate fell to 5.4% from 5.9% a month ago and 10.2% in October. The nu...

Rate cut far from certain despite slowing inflation
ISRAEL · Report · 18 Mar 2024

1. Despite inflation moderation in February, a rate cut in April is far from assured. 2. We are forecasting inflation of 3.2% in the NTM due to an expansionary fiscal policy, higher shipping costs, and an expected acceleration in rental prices. 3. The current account surplus has improved bu...

Next rate decision will hinge mostly on the direction of the shekel
ISRAEL · In Brief · 18 Mar 2024

Inflation continued to moderate in February Inflation slowed to 2.5% y/y from 2.6%, and core to 2.2% from 2.4%. The main item moderating inflation was housing rental prices which decelerated to 2.0% y/y from 3.0% last month. Other items tended to surprise on the upside, both goods and services. I...

Inflation continues to moderate, rate cut in April far from certain
ISRAEL · In Brief · 15 Mar 2024

Inflation continues to moderate, but the devil is in the details Inflation in February (0.4% m/m, 2.5% y/y down from 2.6% in January) was in line with expectations (or a bit at the high end, we were expecting 0.3%). Core inflation (headline excluding energy and fresh produce) moderated to 2.2% y/...

Trade data points to recovery, core trade deficit continues to shrink
ISRAEL · In Brief · 13 Mar 2024

In February, there was a rapid increase in both industrial exports and imports (seasonally adjusted). Industrial exports increased by 9.5 percent (compared with January), mainly pharmaceuticals, electronic components, and defense exports. Exports rose 7.1% in Dec-February, following a similar dec...

Current account surplus improves + institutions sell some FX in January
ISRAEL · In Brief · 12 Mar 2024

Yesterday's shekel depreciation (1.1% against the basket) occurred despite the increases in overseas markets and positive news regarding an increase in the current account surplus in the fourth quarter, to $10.5 billion, compared with $4.7 billion in the third quarter. The goods and services acco...

Deficit could undershoot on robust tax revenues
ISRAEL · Report · 11 Mar 2024

1. February witnessed further expansion in expenditure due to the war, while tax revenues remained stable. 2. Business sector activity continues to recover, while consumer confidence remains suppressed. 3. Israel’s issuance abroad will take some pressure off the domestic bond market.

Fiscal deficit pushes higher despite robust tax revenues
ISRAEL · In Brief · 10 Mar 2024

The fiscal deficit reaches 5.6% GDP LTM The fiscal cost of the war in the first two months reached 17.3bn ILS (0.9% GDP), including most civilian support due to the war. Total expenditures are up by 44% y/y in Jan-Feb. Tax revenues surprised on the upside, reflecting stability y/y in real terms. ...

Business sector activity continues to improve gradually
ISRAEL · In Brief · 07 Mar 2024

The Business Tendence Survey for February points to further gradual recovery in growth, although at a pace slower than pre-war. The current situation component improved slightly but remains below the pre-war level. The expectations component turned slightly net positive from net-negative. The emp...

Sharp increase in wages of non-Israeli workers will be inflationary
ISRAEL · In Brief · 05 Mar 2024

Sharp increase in wages of non-Israeli workers will be inflationary In January, average wages among Israeli workers rose 5.9% y/y, moderating from 9.1% a month ago. In January, there was an increase of 0.6% in the number of employee posts, apparently at low wage levels (which lowered the total av...

Monetary caution due to elevated uncertainty
ISRAEL · Report · 04 Mar 2024

1. Rates remained stable last week due to elevated uncertainty, both geo-political and fiscal. 2. Private consumption has rebounded since the initial impact of the war and is currently above pre-war levels. 3. The shekel continued to appreciate in expectation of an imminent cease-fire, se...

Monetary caution due to elevated uncertainty
ISRAEL · In Brief · 03 Mar 2024

The BoI preferred to err on the side of caution: The rate hold decision last week was not a major surprise as expectations were split. We think the major factors contributing to this decision were: the postponement of fiscal approval, shekel volatility following the Moody’s downgrade, and the pos...

The BOI prefers to be cautious, but signals further loosening ahead
ISRAEL · In Brief · 26 Feb 2024

The Bank of Israel decided to err on the side of caution today and kept rates stable at 4.5%. Some of the same phrases in the announcement were similar to those in the previous rate decision (when rates were cut by 0.25%): “There is a great amount of uncertainty with regard to the expected severi...