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COUNTRY INSIGHTS

Shekel depreciation increases the likelihood of further tightening
ISRAEL · Report · 14 Aug 2023

1. Pressure for shekel depreciation continues, increasing the likelihood of further monetary tightening. 2. We expect July’s CPI to reach 0.5% m/m on seasonal factors; Q223 GDP is expected to reflect growth of 2.8% saar. 3. The elevated risk premium for Israel has been translated into a we...

Shekel depreciation increases the likelihood of further tightening
ISRAEL · In Brief · 13 Aug 2023

Shekel weakening continues Last week, the shekel declined by 0.9% against the basket and 4% YTD. The BoI views the shekel as critical for inflation, and sees the FX passthrough at 10%-20% having increased in recent months. In June, Israeli institutions were net purchasers of 0.8bn USD and 5.2bn i...

Expanding defense exports reduces the trade deficit
ISRAEL · In Brief · 10 Aug 2023

Industrial exports continue to expand, especially defense exports. Although “defense” is not an export category, we can see the increase in exports of “transport equipment”, “metal products” and “electronic and optical products”, mostly associated with military equipment. Total industrial exports...

FX passthrough on inflation accelerates
ISRAEL · In Brief · 10 Aug 2023

The BoI Inflation Report for the 1st half of the year analyzes the inflationary trends and monetary policy for this period. The Report estimates that the judicial overhaul (domestic factors) contributed an additional 10% depreciation of the shekel. The BoI estimates that the FX passthrough on inf...

Corporate survey indicates continued growth with signs of moderation ahead
ISRAEL · In Brief · 09 Aug 2023

Corporate survey indicates continued growth with signs of moderation ahead The Business Sector Tendency Survey indicates continued expansion of economic activity. Basically, there is a problem of the lack of seasonal adjustment in the series of the survey. With that, the current activity componen...

Israeli saving institutions continue to purchase FX
ISRAEL · In Brief · 08 Aug 2023

Israeli savings institutions continue to increase their FX exposure. In June institutions (total sector: pension, insurance, provident funds) increased their exposure to 19.9% of all assets under management from 19.2% last month (16.5% in Dec 22). They increased their exposure to foreign assets t...

Rapid wage growth likely to keep inflation elevated
ISRAEL · Report · 07 Aug 2023

1. Wage growth has accelerated in recent months, posing an increasing inflation risk. 2. The shekel remains volatile, reacting to political developments surrounding the judicial overhaul. 3. The BoI sees the possible worsening of the macro environment as a higher risk to financial stability...

Rapid wage growth likely to keep inflation elevated
ISRAEL · In Brief · 06 Aug 2023

Wages continue to accelerate Initial data for average wages in June, reflect nominal growth of 6.3% y/y (for Israelis only, exc. foreigners), accelerating from 5.4% in May. Wages have accelerated in recent months on the back of a tight labor market, especially in service sectors. This is likely t...

Market volatility in reaction to judicial legislation
ISRAEL · Report · 31 Jul 2023

1. The shekel weakened by over 2% last week due to the judicial legislation that is weakening the power of the Supreme Court. 2. This will impact inflation and could support further monetary tightening. 3. We expect GDP growth to slow next year, to 1.8% from 3.4% this year.

Market volatility in reaction to judicial legislation
ISRAEL · In Brief · 30 Jul 2023

The passing of the reasonableness cancellation law impacts markets Last week, markets reacted to the passing of the law cancelling the ability of the Supreme court to overturn government policy if deemed “unreasonable”. Following the decision, the shekel sold off and then stabilized (down 2.3% ag...

Judicial measure passes resulting in market volatility
ISRAEL · In Brief · 24 Jul 2023

Yesterday, the Israeli parliament passed the bill to cancel the reasonableness standard, the first part of a planned judicial overhaul. The bill passed by a vote of 64-0 in the Knesset. All opposition lawmakers walked out as the vote was taking place. The bill takes away the Supreme Court’s power...

Markets will react to the judicial legislation developments this week
ISRAEL · Report · 24 Jul 2023

1. Markets will react today to the judicial legislation developments and possible compromise. 2. The labor market is showing initial signs of slack, with the number of employed declining in June. 3. The BoI Composite Index of the economy is pointing to steady growth on strong exports and cr...

The markets will react to the legislation developments this week
ISRAEL · In Brief · 24 Jul 2023

The markets will react the legislation developments this week 24.7.23 The financial markets are optimistic regarding a compromise Last week witnessed an upward correction in local markets, including the bond market and FX. This could reflect an expectation for a positive compromise on the judicia...

Signs of inflation moderation
ISRAEL · Report · 17 Jul 2023

1. June’s CPI points to broad deceleration of inflation, both in goods and services, especially rental prices. 2. Growth in Q223 is likely to remain fairly robust on the back of strong exports of goods (defense exports mostly). 3. The shekel remains vulnerable to expectations regarding the ...

Signs of inflation moderation
ISRAEL · In Brief · 16 Jul 2023

Inflation in June surprised on the downside (as it did May) Core inflation slowed to 4.5% y/y from 4.9% in May and 5.3% in April. Prices of both goods and services (rental prices especially) have decelerated. We expect inflation to reach 2.6% in the coming year, as domestic demand slows, housing ...

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