Psagot Investment House Predicts No Interest Rate Cut by Bank of Israel Next Week
Translated & summarized from Ice by baba
Psagot Investment House predicts the Bank of Israel will hold interest rates steady next week, awaiting clearer economic and budgetary conditions post-election. This comes despite moderating wage growth and signs of economic recovery, including increased consumer spending and confidence. The investment house cited uncertainty over future fiscal policy as a key factor in its assessment. The Bank of Israel's decision is expected after the upcoming elections.
The story in 5 lines · by baba
- Psagot Investment House forecasts the Bank of Israel will not cut interest rates next week.
- The bank is expected to wait for economic clarity after the upcoming elections.
- Recent data shows a 0.3% decrease in average salary last month.
- Economic activity is showing signs of recovery, with increased consumer spending.
- Uncertainty regarding post-election fiscal policy influences the decision.
Psagot Investment House anticipates that the Bank of Israel will likely decide against lowering its interest rate in the upcoming meeting. The decision is expected to be postponed until the economic and budgetary landscape becomes clearer following the elections. This projection comes despite recent data indicating a slowdown in wage growth and reduced concerns about inflationary pressures stemming from salaries.
Recent wage data shows a downward trend, with the average salary decreasing by 0.3% in the last measured month, marking five consecutive months of decline. The annual wage growth rate has also moderated to 3.4%, down from 6.5% and 6.4% in the preceding two months. According to Psagot, this moderation may alleviate fears of wage-driven inflation surprises, granting the Bank of Israel more flexibility in its interest rate decisions.
Concurrently, economic activity appears to be recovering. Job growth has been concentrated in lower-wage sectors such as hospitality, retail, arts, entertainment, and agriculture. Consumer confidence has also improved, rising three points to negative 17, and business trend surveys indicate a general upturn across most industries.
Evidence of this economic rebound is also visible in consumption data. The annual growth rate of credit card purchases increased to 5.4% between June and August, primarily driven by a rise in service-related spending, including insurance, flights, and leisure. The total weekly average of credit card purchases reached a high of approximately 2.12 billion shekels by the end of September, according to Bank of Israel figures.
Psagot's assessment suggests that the combination of moderating wages and recovering economic activity provides the Bank of Israel with a rationale to wait before implementing another interest rate reduction. This is further compounded by uncertainty surrounding post-election fiscal policy. Therefore, despite encouraging inflation-related data, the firm believes the Bank of Israel will likely maintain the current interest rate and reassess the economic situation later.
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