We are revising our rate forecast from hold through 2020 to zero or possibly negative by mid-2020. We reached this assessment following the recent policy rate press conference, and revised BoI macro forecast (reflecting slower growth in 2020 of 3.0% and possibly lower rates, to 0.1% from the current 0.25%).
According to the Governor, one or more MPC members were in favor of a rate cut this last rate decision. In addition, it is increasingly clear that Governor Yaron is really not in favor of FX intervention as a policy tool (as were previous Governors). If FX intervention (which succeeded in slowing shekel appreciation in 2014-2018) is more or less off the table (although at some point it could be used), the main tool remaining is lower policy rates.
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