Bank of Israel

August 29, 2016

Israel’s last central bank interest rate change occurred in February 2015. A 15-basis point cut then to 0.10% culminated 325 basis points of easing that had begun during 2011. This month’s statement from the bank of Israel notes that market-implied measures do not anticipate a rate hike before 2018, and the opportunity is not taken to discredit that presumption. By the same token, there’s no strong incentive to cut the rate. GDP grew almost 4% last quarter, an acceleration from the first quarter’s pace, although officials caution that it’s too early to tell if the faster pace will be sustained. On-year CPI inflation is still below zero at -0.8% but was higher than anticipated in the latest reported month. Expected inflation still lies below the target, and officials continue to view the shekel as overvalued, insofar as┬ásuch rose 5.1% on a trade-weighted basis over the past year.

Copyright 2016, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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