Bank of Israel Counteracts Treasury's Expansionary Policy

Yoni Pening, Chief Strategist at Mizrahi Tefahot Bank, presented a weekly economic review discussing various global and Israeli economic indicators. In the US, September's employment data showed some cooling, differing from August's pre-midterm election trends and recent purchasing managers' index readings. The PCE price index, with significant methodological updates, indicated that annual inflation has been revised downward, aligning with CPI data. Both are expected to peak below 4% next month. Energy price increases have not significantly impacted other sectors, yet savings rates are estimated to be nearly 2% higher than previously thought, despite consumer sensitivity to prices due to rising fuel costs and yields.

In Israel, credit card usage data points to strong post-war demand, particularly as international flights decrease. Despite increased defense spending, the Treasury's financing needs in October remain moderate, coinciding with a significant redemption of the Shekel 1026 bond. In contrast to the Treasury's expansionary monetary policy, the Bank of Israel is counteracting this by issuing more government bonds (Mak'am).

European preliminary inflation data for September suggests energy prices contributed nearly 2% to inflation. This indicates a potential move towards the European Central Bank's target as energy prices stabilize, although market expectations still anticipate further interest rate hikes later in the year.