Macro factors support more aggressive tightening:
No less important for markets will be the BoI macro forecast and Yaron’s press conference. We expect an upward revision in the rate forecast (most likely to 2.25%-2.5% one year from now, previously 1.5%).
Inflation: Energy prices are pushing higher. Petrol prices increased by 4.7% on July 1st, although the MoF is promising an additional reduction of the tax on petrol in August. Electricity prices are expected to increase as well, due to the spike in coal prices. Food prices in Israel (up only 5.6% y/y) lag most developed countries, and we expect some “catching up” in coming months.
FX: Last week, the shekel weakened by 2.4% against the dollar and by 1.7% against the Euro. The shekel remains highly correlated to sharp market co...
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