Bank of Israel Governor Expected to Hold Interest Rates Steady
Translated & summarized from Maariv by baba
Bank of Israel Governor Amir Yaron is expected to maintain the current interest rate despite a recent drop in the September inflation index. Global inflation and budgetary concerns are key factors, with no change anticipated until at least late 2027. However, a potential rate cut to 3% could occur if the shekel strengthens. Economists also predict no immediate rate reduction, citing potential tax increases and global trends.
The story in 6 lines · by baba
- Bank of Israel Governor Amir Yaron will not change interest rates despite negative September inflation.
- Global inflation and budgetary challenges are cited as reasons for maintaining the current rate.
- No interest rate change is expected until at least the end of 2027.
- A potential interest rate reduction to 3% is possible if the shekel appreciates.
- Bank Hapoalim raised its inflation forecast to 2.3% for the next 12 months.
- Markets are not anticipating any interest rate cuts in the coming year.
Despite a recent negative inflation report for September, Bank of Israel Governor Professor Amir Yaron is not expected to change the current interest rate. This decision is primarily influenced by rising global inflation and budgetary challenges. Due to the upcoming elections and the sensitive political climate, Yaron will refrain from giving personal interviews.
The governor explained that the low September inflation index was partly due to a reduction in the fuel excise tax per liter, alongside increases in food and housing prices driven by rental pressures. Consequently, no change in the Bank of Israel's interest rate is anticipated, not just currently but at least until the end of 2027. However, a potential reduction to 3% could occur if the shekel's appreciation trend resumes.
Economists at Bank Hapoalim noted in their weekly review that the September inflation decrease was larger than market expectations, attributing it to seasonal factors and a 7.3% drop in overseas travel expenses. While housing prices, which are not included in the consumer price index, saw a 0.6% decline and are 3.2% below their peak, Bank Hapoalim also predicts no immediate rate cut. They highlighted uncertainty regarding the budget for continuing the fuel excise tax reduction, anticipating a gradual price increase from November.
Bank Hapoalim has raised its 12-month inflation forecast to 2.3%, citing the shekel's depreciation, expected tax hikes post-election, and the fuel excise tax increase. The bank emphasized that despite low inflation, markets are not pricing in any rate cuts within the next year, a view they share, especially given anticipated rate hikes in most developed countries.
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