Bank of Israel looked at ownership, but some analysts demand cuts: Reuters poll

Jerusalem — Bank of Israel is expected to keep short-term interest rates unchanged this week for the 13th consecutive time, but some analysts will cut interest rates to stop the shekel, which is at its highest level in 26 years against the dollar. I think it should be. ..

All 16 economists surveyed by Reuters set their benchmark rates at a record low of 0.1% when the central bank’s Monetary Policy Committee (MPC) announced its decision on Monday at 4 pm (1400 GMT). I believe to keep it.

Prior to the final meeting on October 7, analysts said the next change was as early as 2022, following rising inflation and a rapid economic recovery amid widespread deployment of the COVID-19 vaccine. I widely believed that it would be raised to. One MPC member voted to raise interest rates to 0.25 percent at the meeting.

Since then, the shekel has risen 7% against the dollar until late 1995, the highest emerging currency since the pandemic began, with inflation in October and lower-than-expected GDP growth in the third quarter. ..

Analysts said the main focus of the meeting on Monday was how to deal with the shekel as banks’ plans to buy $ 30 billion in foreign currency ended in late October.

Despite the anger from exporters, policymakers seem to be strengthening the shekel as it helps lower import prices and curb inflation.

“There are many reasons why banks are lowering interest rates, given the shekel surge, inflation mitigation, and fears of coronavirus renewal,” said Amir Kahanovich, chief economist at Excellence Investment House. It is likely to remain unchanged, mainly as other central banks have begun to raise interest rates. “

Inflation in Israel fell from its eight-year high of 2.5% in September to 2.3% in October, staying within the government’s annual target of 1-3%.

Based on bond yields, economists forecast an average of 1.8%, but interest rates are expected to reach 2.8% in the next 12 months.

The economy has grown 2.4% annually in the third quarter over the past three months, well below expectations of 6%. Both the government and central banks forecast 7% growth in 2021.

This week’s meeting is the first for Naomi Feldman, a former Federal Reserve Board senior economist who succeeds Reuben Gronau.

Stephen Share