Rates remain unchanged as well as forward guidance

ISRAEL - In Brief 23 Aug 2021 by Jonathan Katz
Rates remained unchanged today at 0.1% with the monetary statements noting both the uptick in infections (but hopeful that the booster shot will slow this trend) as well as the strong economic recovery. The output gap is at 3% in Q221, compared to the previous assessment of 4.5%. There is a hiring constraint (high job vacancies) which weigh on expansion, but the BoI does not seem overly concerned, noting that this varies according to regions in Israel. The upward trend in inflation continues y/y, impacted by the reopening of the economy (transitory). The FG remained unchanged at: The Committee will therefore continue to conduct a very accommodative monetary policy for a prolonged time, using a range of tools as necessary, including the interest rate tool, in order to continue supporting the attainment of the policy targets and the recovery of the economy from the crisis, and to ensure the continued orderly functioning of the financial markets.We expect the next rate decision to include an announcement (which will include a press conference) regarding the cessation of the bond purchasing program by end-year. A rate hike still appears unlikely in the coming year, but could occur towards the end of 2022.

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