Tomorrow (Monday) at 16:00 the Bank of Israel Governor, Prof. Amir Yaron, is expected to raise the interest rate in the economy for the sixth time in a row since the beginning of the year.
Most economists expect an increase of 0.5% to reach 3.25% - its highest level since September 2011. Some estimates speak of a sharper increase of 0.75% following the acceleration of inflation in the last month.
In the last two decisions, we will recall, the Bank of Israel raised the interest rate by a sharp rate of 0.75% in order to reach a high interest rate in a short time and with the aim of curbing inflation in the economy.
According to the data of the Central Bureau of Statistics published last week, the annual inflation rate in Israel accelerated and stood in Israel in the last 12 months (October 2022 compared to October 2021) at 5.1%.
Beyond that, housing prices completed an annual jump of 19.8%.
Waiting for his decision.
Governor Prof. Amir Yaron, photo: Yehshua Yosef
Moody Shaffer.
"The Bank of Israel is committed to lowering inflation towards the target", photo: Inbal Marmari
Dr. Gil Michael Bafman, Chief Economist of Bank Leumi. "The overall employment data indicates relative stability", Photo: Leumi Public Relations
Accelerating inflation requires, as mentioned, a sharp increase in interest rates, but on the other hand, since the last interest rate decision, the growth figures published last week together with the decrease in the employed rate indicate the beginning of the slowdown in the Israeli economy.
Moreover, the governor of the Bank of Israel said in the latest interest rate decision that the current interest rate is already considered an interest rate that "restrains" inflation.
Bank Hapoalim estimates that the Bank of Israel is expected to "take its foot off the gas" tomorrow and raise the interest rate by 0.5%.
According to Modi Shafferer, Bank Hapoalim's financial markets strategist, "The slowdown in growth, especially in private consumption, the deterioration in employment data in the last two months, the moderation of inflation expectations in Israel to the target range, the expectation of a slowdown in the rate of interest rate increases in the US (the market is pricing in a 0.5% increase in December), The less hawkish tone recently taken by the world's largest central banks, and the expectation that the world's largest economies will enter a recession in 2023 - all support the 'lowering the gas foot' in Israel as well.''
On the other hand, Shafferer points out that the sharp increase in inflation supports an additional interest rate increase of 0.75%.
"We estimate that the chance of an interest rate increase of 0.5% in the upcoming decision is higher, but in any case we remain in our estimation that the Bank of Israel interest rate will reach a level of at least 3.5% and will stand at 3.50% to 3.75% in the first quarter."
Beyond that, Shafferer estimates that, similar to American Governor Powell, Governor Yaron will emphasize that the Bank of Israel is committed to lowering inflation towards the target.
The Employment Bureau in Tel Aviv (archive, those photographed have nothing to do with the article).
The unemployment rate is on a moderate rise, photo: Yehoshua Yosef
Building apartments.
The prices increased, photo: Gideon Markowitz
On the other hand, Bank Leumi estimates that all the data supports an interest rate increase of 0.75% tomorrow, to a level of 3.50%.
Leumi's chief economist, Dr. Gil Michael Bafman, writes in his weekly review: "We estimate that the totality of the data supports an interest rate increase of 0.75% to 3.50%.
The first estimate of Israel's national accounting data for the third quarter of the year did indeed indicate a slowdown in growth, but the main growth components, excluding industrial exports and consumption of sustainable products, showed growth at a reasonable rate.
The unemployment rate is on a moderate rise, but the overall employment data indicates relative stability - a high level of job vacancies and a certain acceleration in the rate of wage growth.
Also, the acceleration of inflation, which is expected to continue in the coming months, along with the continued rise in apartment prices, also support the continuation of the interest rate hike process.
This, when in the background interest rates continue to rise at a rapid rate in the US and in most of the major central banks."
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