The BoI prepares markets for imminent tightening

ISRAEL - Report 22 Feb 2022 by Jonathan Katz

1. The forward guidance in the monetary statement shifted sharply, conveying the likelihood of tightening in “coming months”.

2. The various factors in the monetary statement all support tightening: inflation has accelerated, growth is robust, unemployment has declined and the Omicron wave is fading.

3. Robust GDP growth (16.6% in Q421) suggests that the output gap is rapidly closing.

4. Inflation surprised slightly on the upside and is expected to remain above 3% y/y until June.

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