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COUNTRY INSIGHTS

Rate stability expected on Thursday with a more neutral bias
ISRAEL · In Brief · 05 Jan 2020

GDP growth in 2019 reached 3.3% (1.3% per capita)Drivers: Private consumption increased by 3.9%, public consumption 4.1% and service exports 9.0%.Weak growth: industrial exports up only 1.5%, and investments in fixed assets up only 0.3%.The public debt/GDP ratio is expected to decline in 2019 (be...

Strong service exports are shekel supportive
ISRAEL · In Brief · 29 Dec 2019

Service exports expanded sharply in October by 4.4% m/m (15.3% y/y). Service exports are mostly hi-tech services (software, IT, cyber, etc.).This sector is less sensitive to the global manufacturing slowdown.Service exports are expected to expand by nearly 10% this year.Import prices of consumer ...

Inflation likely to surprise on the upside in 2020
ISRAEL · Report · 23 Dec 2019

Recent indicators (IP, revenues) point to steady growth in early Q4 2019, unsupportive of lower rates. Residential starts/completions remain fairly strong, supportive of a modest increase in housing/rental prices. We expect inflation to reach 1.2% in the NTM, above market expectations.

Despite the low CPI print, we do not expect a rate cut
ISRAEL · Report · 16 Dec 2019

Although inflation in November surprised on the downside, reaching -0.4% m/m and 0.3% y/y, a rate cut is far from certain. The CA surplus is likely to surpass 4% GDP this year and improve further in 2020. Israeli savings institutions sold FX of 1.2bn USD (net) in October and 5bn YTD, supporting s...

Despite low CPI print, a rate cut is far from certain
ISRAEL · In Brief · 16 Dec 2019

November's CPI surprises on the low side Inflation in November reached -0.4% m/m (0.3% y/y), lower than our forecast of -0.3% m/m and market expectations of -0.2% to -0.3%. Core inflation (the CPI excluding energy and fresh produce) remained stable at 0.5% y/y similar to last month, but clearly t...

The BoI purchases 1.3bn USD in November; rate cut less likely
ISRAEL · Report · 09 Dec 2019

The Bank of Israel purchased 1.3bn USD in November, signaling that FX intervention is currently the preferred monetary tool, and not lower rates. The fiscal deficit has stabilized at around 3.7% of GDP (LTM) since Q219 on some tighter spending and steady tax revenues. The Business Confidence Surv...

The BoI avoids a cut, preferring FX intervention
ISRAEL · Report · 02 Dec 2019

The BoI has signaled that a rate cut is currently off the table (unless the economy deteriorates), with FX intervention the preferred tool. Recent economic indicators point to fairly stable growth, and the BoI Composite Index witnessed a slight acceleration in recent months. In politics, despite ...

Despite weak inflation, a strong shekel and soft underlying growth, rates remain on hold
ISRAEL · Report · 25 Nov 2019

Despite weak inflation, a strong shekel and soft underlying growth, rates remain on hold. * Headline inflation is running at 0.4% y/y, and core at 0.5% in October. * The shekel has appreciated by 2.3% (against the basket) this month, and remained stable since the last rate decision. * Des...

Rates remain on hold today
ISRAEL · In Brief · 25 Nov 2019

Policy rates remained stable but the loosening bias was maintained. The summarizing statement was clear:"it will be necessary to leave the interest rate at its current level for a prolonged period or to reduce it in order to support a process at the end of which inflation will stabilize around th...

Low inflation, strong shekel and mixed growth support rate cut today (Monday)
ISRAEL · In Brief · 24 Nov 2019

Rate cut expected today (Monday) We think that weak inflation, a strong shekel and soft underlying growth support a 0.15% rate cut today. Headline inflation is running at 0.4% y/y, and core: 0.5% in October, declining from 0.7% last month and 0.9% two months ago. The shekel has appreciated by 2.3...

Another round of elections appears increasingly likely
ISRAEL · In Brief · 21 Nov 2019

The head of Blue and White (Gantz) announced that he has failed to form a coalition in the 28 days allotted to him, following a similar period in which Netanyahu tried to form a government.We now go to a 21-day period in which anyone can try to form a coalition, but this will require the approval...

Soft core inflation and weak underlying growth support a rate cut
ISRAEL · Report · 18 Nov 2019

Although headline GDP growth was robust, GDP growth excluding inventories actually contracted in Q319. The quarter witnessed a contraction of exports, investment in capital goods, and non-durable consumption per capita. We think that both the latest CPI and GDP data support a rate cut of 0.15% on...

October's CPI comes in at the low end of consensus
ISRAEL · Report · 15 Nov 2019

October's CPI reached 0.4% m/m and 0.4% y/y (up slightly from 0.3% y/y last month), coming in at the low end of consensus, which was in the 0.4%-0.5% range. We also had expected 0.5% but two items surprised on the downside. Housing (rental prices), which makes up nearly 25% of the CPI, moderated ...

High CPI and robust growth likely to delay easing
ISRAEL · Report · 11 Nov 2019

The adjusted fiscal deficit in October moved slightly lower to 3.6% GDP LTM. Wage growth has moderated, weakening inflationary pressure. We expect inflation to reach 0.5% m/m (0.5% y/y) in October, at the high end of consensus. In politics, Lieberman set conditions for forming a unity government,...

GDP growth expected to reach nearly 3% in Q319
ISRAEL · Report · 04 Nov 2019

Recent economic indicators suggest that GDP growth remained fairly strong in Q319; we estimate close to 3% saar. GDP growth is being fueled by steady PC demand and positive net exports. Capital flows continue to support a strong shekel, with robust FDI and fairly neutral financial flows. In poli...

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