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COUNTRY INSIGHTS

The BoI prepares markets for a tightening cycle
ISRAEL · Report · 28 Feb 2022

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 ...

The BoI prepares markets for a tightening cycle
ISRAEL · In Brief · 27 Feb 2022

The BoI is clearly signaling for an imminent hike Rates remained stable last week, but the FG was revised significantly to suggest tightening “in the coming months”. This more hawkish bias is due to both higher-than-expected inflation in December and January and very robust growth numbers. The la...

Bond issuance reduced in March due to robust fiscal data
ISRAEL · In Brief · 24 Feb 2022

The MoF reduced the weekly bond issuance to 1.0bn ILS in March from 1.15bn in February on the back of very positive fiscal data in January and expectations that the deficit will undershoot target. Bond redemptions will reach 3.1bn in March, close to the level of issuance of 4.0bn. Following the s...

The BoI prepares markets for imminent tightening
ISRAEL · Report · 22 Feb 2022

1. The forward guidance in the monetary statement shifted sharply, conveying the likelihood of tightening in “coming months”. 2. The various factors in the monetary statement all support tightening: inflation has accelerated, growth is robust, unemployment has declined and the Omicron wave ...

The BoI prepares the market for imminent tightening
ISRAEL · In Brief · 21 Feb 2022

The BoI prepares the market for imminent tightening Rates remained unchanged today (as expected) but the big news was the sharp shift in the forward guidance from “The Israeli economy’s process of recovery from the crisis continues. However, there are still challenges to economic activity. The Co...

The PMI declines sharply
ISRAEL · In Brief · 21 Feb 2022

The PMI declined in January by 4.9 points to 42.9, with both the domestic and export orders declining sharply (by over 7 points) to reflect contraction. The employment component fell by 18 points. Activity in January was influenced by the Omicron wave, but nevertheless, this sharp decline in all ...

Robust growth supports monetary tightening
ISRAEL · In Brief · 20 Feb 2022

The Israeli economy expanded by 8.1% in 2021 Annual GDP growth in Q421 reached 16.6% following 6.7% in Q321. The level of GDP in Q421 is 8.9% above Q419 (pre-Covid), basically reflecting rapid annual growth of above Israel’s estimated growth potential of 4%. The output gap is rapidly closing. Lab...

Robust growth supports monetary tightening in April
ISRAEL · In Brief · 16 Feb 2022

GDP growth in 2021 reached 8.1% (above expectations), with private consumption up 12%, investments expanded by 10%, and exports increased by 14%. This GDP growth is way above initial BoI estimate for 6.5% growth. GDP growth in Q421 reached 16.6%, with private consumption up 19% and exports up 26%...

April's rate hike appears more certain
ISRAEL · In Brief · 15 Feb 2022

January’s CPI slightly exceeds expectations Inflation in January increased by 0.2% and by 3.1% y/y (up from 2.8% last month). Market expectations were in the 0.0%-0.1% m/m range. There were no big inflation surprises, several items increased slightly more than expectations; furniture and home app...

The BoI is proceeding to revise the inflation target
ISRAEL · In Brief · 14 Feb 2022

The BoI is proceeding to revise the inflation targetThe BoI has been considering altering the inflation target for several years now. The general direction (in our opinion) is to shift the inflation target from a range of 1%-3%, to “around 2% symmetric over the medium term” as the ECB target is f...

Strong fiscal numbers expected to support bond issuance reduction
ISRAEL · Report · 14 Feb 2022

1. A surprisingly large fiscal surplus in January supports lower bond issuance going forward. 2. We expect January’s CPI to come in at 0.1% m/m and 3.0% y/y (accelerating from 2.8%). 3. We maintain our call for a rate hike on April 11; further tightening will be moderate, and the cyc...

Strong fiscal numbers expected to support bond issuance reduction
ISRAEL · In Brief · 13 Feb 2022

January witnessed a huge fiscal surplus The fiscal surplus reached 18.5bn ILS, as tax revenues increased sharply on huge tax revenues from corporates. The LTM fiscal deficit declined to 3.3% GDP from 4.5% last month. We expect the MoF to reduce weekly bond issuance to 0.8-0.9bn from 1.1-1.2bn at ...

Surprisingly good fiscal news is positive for the bond market
ISRAEL · In Brief · 10 Feb 2022

The fiscal deficit continues to move rapidly lower, reaching 3.3% GDP LTM in January from 4.5% in December 2021. The fiscal surplus reached 18.5bn ILS in January (in part seasonal). Tax revenues continue to expand rapidly, up 39% in January y/y! mostly due to a surge in revenues from corporate ta...

Fiscal package expect to have a modest impact on inflation
ISRAEL · In Brief · 10 Feb 2022

The government presented yesterday a series of fiscal measures aimed at reducing the cost of living and improving disposable income, including reducing import tariffs on a series of consumer goods and raw materials, reducing the price increase of electricity, subsidizing afternoon kindergarten ca...

Dovish comments by Deputy Governor Abir weaken the shekel
ISRAEL · In Brief · 08 Feb 2022

BoI Deputy Governor Abir succeeded in reducing expectations for an imminent rate hike. Today, the shekel weakened by 0.8% against the basket of currencies following an interview (Globes) with Abir who stated that even if inflation exceeds 3% y/y in the short run, the BoI thinks it will come back ...

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