Rates on hold, FX intervention dependent on the state of the economy

ISRAEL - In Brief 22 Nov 2021 by Jonathan Katz

There were no surprises in the rate hold decision. The statement noted that those countries which hiked have inflation above target. In Israel market expectations are at the high end of target (but within) and forecasters and the BoI model expect lower inflation in the next 12 months. Regarding FX intervention, the statement noted that it is not limited, but will depend on the state of the economy and economic growth.Our take: The BoI wants to convey the message that rates will not move higher in the near future, and that as long the economy is expanding fairly rapidly (as it is now), there is less justification in intervention. Meaning: pressure for shekel appreciation will most likely continue and be a moderating factor on inflation. We feel comfortable with our below-consensus inflation forecast of 1.5%.

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