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COUNTRY INSIGHTS

How hawkish will the BoI sound today?
ISRAEL · In Brief · 10 Apr 2022

We expect a rate hike today of 0.15% Due to robust growth and strong labor market, we cannot rule out a rate hike of 0.4% to a level of 0.5% (35% probability). All conditions have been met to commence a tightening cycle: recovery from the pandemic, rapid economic growth, strong labor market, infl...

Coalition stability weakens
ISRAEL · In Brief · 06 Apr 2022

The stability of the coalition weakens One member of Benet’s party Edit Salman, announced her resignation from the coalition. This will weaken the narrow majority of the coalition (from 61 members to 60), although the “Arab List” could support the coalition without actually joining the coalition....

Private consumption rebounds in early 2022
ISRAEL · Report · 04 Apr 2022

1. Israeli institutions and the BoI were the dominant players in the FX market in Q421. 2. Private consumption rebounded in January-February as Omicron restrictions were lifted. 3. We expect a sharp increase in the “travel abroad” CPI item in March-April, contributing to higher inflation.

Private consumption rebounds in early 2022
ISRAEL · In Brief · 03 Apr 2022

Consumer spending has accelerated Credit card purchases increased by 1.8% m/m (in real terms) in February, following 2% in January as the Omicron impact dissipates. Chain store sales declined by 1% in January-February as consumer spending shifts more towards spending on services. This follows a 4...

The Bank of Israel prepares markets for aggressive tightening
ISRAEL · Report · 28 Mar 2022

1. Deputy Governor Abir suggested that more aggressive tightening is likely, due to inflation acceleration. 2. The labor market is rapidly returning to pre-Covid employment levels, considered full employment. 3. Hi-tech service exports continue to expand rapidly, supportive of shekel...

The Bank of Israel prepares markets for aggressive tightening
ISRAEL · In Brief · 27 Mar 2022

The Deputy Governor suggests aggressive tightening ahead At a conference on Thursday, Andrew Abir said: “In view of recent developments in inflation and the increase in expectations, the process of monetary tapering may be more rapid than we thought.” Clearly, a rate hike on April 11th is to be e...

Labor market recovery is rate hike supportive
ISRAEL · In Brief · 21 Mar 2022

Broad unemployment (including Covid furloughs and those out of a job due to Covid but not actively seeking employment) declined to 5.4% in February from to 5.6% in January. The official narrow definition of unemployment remained at 3.7%. The number of workers increased by 37 thousand in February,...

Accelerating inflation will support tightening
ISRAEL · Report · 21 Mar 2022 · 1 response

1. Annual inflation is expected to accelerate to around 4.5% y/y by May and stabilize at this level for most of 2022. 2. The labor market continues to tighten as the number of job vacancies reaches new highs. 3. We expect the rate tightening cycle to commence on April 11, with rates ...

Monetary tightening expected to be fairly aggressive
ISRAEL · In Brief · 15 Mar 2022

Another upside inflation surprise Inflation in February was up 0.7% m/m and 3.5% y/y (accelerating from 3.1% last month), above market consensus of 3.3%. Core inflation (the CPI excluding energy and fresh produce) accelerated to 3% y/y from 2.7%. February’s upside surprise came from basically two...

Israeli saving institutions purchased 3.5bn USD in January
ISRAEL · In Brief · 14 Mar 2022

Israeli institutions purchased 3.5bn USD net in January, following purchases of 1.6bn in December. In January, institutions purchased assets abroad of 1.0bn USD and purchased FX via derivatives by an additional 2.5bn. Global equity markets declined sharply in January, forcing Israeli institutions...

CA surplus and FDI remain robust
ISRAEL · Report · 14 Mar 2022

1. The current account surplus and net FDI together totaled 8.8% GDP in 2021, underlying Israel’s strong fundamentals and supportive of the shekel. 2. The fiscal deficit declined to 2.2% GDP in the last 12 months, supportive of further reduction in bond issuance. 3. We expect a CPI of ...

The CA surplus and FDI remain robust
ISRAEL · In Brief · 13 Mar 2022

Highlights:1. The current account surplus and net FDI together totaled 8.8% GDP in 2021, underlying Israel’s strong fundamentals supportive of the shekel.2. The fiscal deficit declined to 2.2% GDP in the last 12 months, supportive of further reduction in bond issuance.3. We expect a CPI of 0.5% m...

External fundamentals remain exceptionally strong for the shekel
ISRAEL · In Brief · 10 Mar 2022

The current account surplus in Q421 increased to 6.6bn USD up from 4.9bn in Q321. In all of 2021, the surplus reached 22.5bn (similar to 2020) or 4.7% of GDP. In Q421 the service account surplus continued to expand on strong hi-tech exports by 1.2bn while the trade deficit remained stable. Net FD...

Israel’s exposure to Ukraine and Russia is minimal
ISRAEL · Report · 07 Mar 2022

1. Israel’s economic exposure to the Ukraine crisis is fairly limited. 2. Wage growth appears to be accelerating modestly, but the private sector is reporting a lack of available workers. 3. We see inflation's acceleration in the short-term supporting policy tightening, although the BoI ...

Israel’s exposure to Ukraine and Russia is minimal
ISRAEL · In Brief · 06 Mar 2022

The economic impact from the Ukraine crisis is relatively small Total exposure of exports (goods and services) to both Russia and the Ukraine is less than 2.5%. Israel’s defense industry is likely to benefit from increased spending from the EU, especially Germany. A wave of immigration (not clear...

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