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Economic contraction in Q4 apparently less than expected
ISRAEL · In Brief · 23 Jan 2024

The Composite State of the Economy Index increased by 0.4 percent in December—reflecting the economy’s gradual recovery from the impact of the war. The war continued in December, but its impact on activity continued to weaken. It is interesting to note, that the Composite Index, which is co-incid...

Governor Yaron appears satisfied by the fiscal adjustments recently approved in the Cabinet
ISRAEL · Report · 22 Jan 2024

1. The Governor appears cautiously optimistic regarding the recent fiscal adjustments approved in the Cabinet. 2. Inflation declined sharply in Q4 due to the impact of the war, but is likely to rise when hostilities diminish. 3. The labor market remains tight (with the number of officiall...

Governor Yaron appears satisfied by the fiscal adjustments
ISRAEL · In Brief · 22 Jan 2024

Politics/fiscal: The government approved a 16bn ILS fiscal adjustment plan for 2024, with higher taxation in 2025. The fiscal trimming in 2024 includes a 5% across-the-board fiscal cut, a higher cigarette tax and other measures. The Defense budget will increase by an additional 55bn. The Bank of ...

December’s CPI surprised on the downside
ISRAEL · Report · 16 Jan 2024

1. Inflation surprised on the downside in December; core inflation moderated to 2.7% y/y. 2. We have revised our inflation forecast upward due to the weaker shekel and higher taxation as part of fiscal accommodation. 3. This week, markets will follow closely the credibility of the fiscal ...

Inflation in December surprises on the downside
ISRAEL · In Brief · 15 Jan 2024

Inflation in December surprises on the downside Inflation declined by 0.1% m/m and moderated to 3.0% y/y from 3.3% last month (expectations were for 3.1% y/y). Core inflation moderate to 2.7% y/y from 2.9%. Seasonally adjusted CPI in the past three months slowed to an annual rate of 1.5% from 2.3...

Markets will be following fiscal adjustments closely
ISRAEL · In Brief · 14 Jan 2024

The fiscal deficit reached 4.2% GDP in 2023. Expenditures increased by 14.2% (mostly in Q4 due to the war) and revenues declined by 6.4%. The deficit is expected to reach 5.7% in 2024 and possibly higher. Fiscal financing will be diverse, both abroad and domestic, but will require large gross dom...

Fiscal deficit will expand into 2024
ISRAEL · In Brief · 11 Jan 2024

Fiscal deficit reaches 4.2% GDP The fiscal deficit in 2023 reached 4.2% GDP as expenditures increased by 14.2% y/y and revenues declined by 6.4%. The fiscal deficit in December reached 33.8bn ILS (compared to 18.5bn last year) with 17.2bn additional spending due to the war. The deficit of 77bn IL...

Could inflation surprise on the upside in 2024?
ISRAEL · Report · 08 Jan 2024

1. Policy rates were cut to 4.5% due to moderating inflation and a strong shekel; fiscal concerns were secondary. 2. We revised our inflation forecast up to 2.8% in 2024. 3. Higher shipping costs, pent-up demand, and a rebound in housing rentals are likely to push inflation higher.

Will inflation surprise on the upside in 2024?
ISRAEL · In Brief · 07 Jan 2024

Rate cut on decelerating inflation Policy rate declined by 0.25% to 4.5% last Monday with the Bank of Israel noting that inflation has moderated significantly in recent months, the shekel has appreciated and other central banks are expected to loosen. The Governor noted that inflation y/y is expe...

Rates reduced as inflation moderates
ISRAEL · In Brief · 01 Jan 2024

Rates reduced as inflation moderates The BOI cut rates by 0.25% to 4.5% due to the inflation deceleration (which is expected to continue into Q124) as well as lower inflation expectations. This trend (supported by shekel appreciation) effectively raises real rates and allows for lower rates, desp...

Will the BoI reduce rates on Monday? Probably not
ISRAEL · In Brief · 27 Dec 2023

Will the BoI reduce rates on Monday? Probably not The next rate decision on January 1st could really go either way (rate cut or hold), although we are leaning towards a rate hold decision. The factors supporting easing include the sharp decline in inflation in November (headline: 3.3% y/y, core: ...

November’s low CPI, surprising on the downside, supports monetary easing
ISRAEL · Report · 18 Dec 2023

1. November’s CPI came in below expectations as core inflation moderated significantly. 2. This renews expectations for a rate cut in January (in two weeks), assuming low shekel volatility. 3. The CA surplus and net FDI are expected to reach 5.5% GDP this year, but geopolitical/political u...

November’s low CPI supports monetary loosening
ISRAEL · In Brief · 17 Dec 2023

Inflation surprises on the downside Headline inflation declined by 0.3% m/m (expectations were for -0.1%) and slowed to 3.3% y/y from 3.7% last month. Core inflation slowed to 2.9% y/y from 3.5% last month due to a sharp moderation in housing rental (OER) prices to 3.6% y/y from 4.9%. The breakou...

Rate cut in January appears realistic
ISRAEL · In Brief · 15 Dec 2023

Inflation in November surprises on the downside The CPI in November declined by 0.3% m/m (expectations were for -0.1%) and slowed to 3.3% y/y from 3.7% y/y, Core inflation slowed to 2.9% y/y from 3.5% last month. The downside surprises came from the “travel abroad” item which decline by 5.7% (we ...

November's CPI expected to reach -0.1% and 3.5% y/y
ISRAEL · In Brief · 13 Dec 2023

Contrary to our initial expectations, the CBS decided to measure the “travel abroad” item in November (flights, hotels, etc) despite the 80% decline in Israelis traveling abroad. This means that the sharp shekel appreciation (4.3% against the dollar) will push the November CPI print down sharply....