We expect a rate hike on April 11th

ISRAEL - In Brief 16 Jan 2022 by Jonathan Katz

Inflation surprises on the upsideo Inflation in December increased by 0.3% m/m (expectations were for 0.1%), and 2.8% y/y. Core inflation increased by 2.7%.o Inflation surprises were mostly broad-based, with housing rental prices accelerating to 3.3% y/y (from 2.9% last month).o We expect inflation to reach 1.7% in 2022, impacted by wage growth, higher rental prices and higher energy costs, partially offset by further shekel appreciation.We expect a rate hike on April 11tho We have move up our first rate hike forecast to April, due to higher inflation y/y (close to the high end of target), sticky and high inflation expectations, and a rapidly improving labour market. We assume the Fed will hike in March. This assumes the Omicron virus dissipates fairly quickly.Economic indicators point to some deceleration in Januaryo Credit card purchase declined by 7% in the first 11 days of January as did the Google mobility to the workplace, compared to December, due to the Omicron virus. The BoI expects a short wave and minimal impact on the economy.o CBS consumer confidence in December remained low and stable (-12 points) compared to Q321 (-7 points).Trade data point to strong growth in Q421o Manufacturing exports increased by 13% saar.o All import categories expanded fairly rapidly, especially raw materials which suggests growth in manufacturing/construction in coming months.The fiscal deficit surprises on the downside in 2021o The fiscal deficit reached 4.5% GDP on strong tax revenues and modest expenditure growth. o Fiscal financing overshot the deficit financing needs (as in 2020), which allows the MoF to maintain low bond issuance this year.FX: Israeli institutions sold 4.1b...

Now read on...

Register to sample a report

Register