Israeli Shekel Weakens Slightly Ahead of Bank of Israel Rate Decision as Inflation Remains Controlled

The Israeli shekel weakened slightly at the start of the foreign exchange week, trading at 3.00 shekels per US dollar, a 0.2% increase in the dollar's value. The euro also rose by 0.3%, trading above 3.42 shekels. Globally, the US dollar index remained steady at 101.3 points, with the euro and pound stable against the dollar at just under 1.14 and 1.32 respectively. This movement comes exactly one week before the Bank of Israel's next interest rate announcement.

Economists at Leader, led by Yonatan Katz, noted in their weekly review that inflation in Israel remains restrained, with no signs of significant acceleration in local demand. Their analysis is supported by credit card purchase data showing a moderate 2% nominal increase in May and a similar decline in June up to the 22nd. They also forecast a roughly 7% drop in fuel prices in early July, assuming Brent crude averages $74 per barrel and an exchange rate of about 3 shekels per dollar. Additionally, sharp price declines in some fruits and vegetables in the latter half of June are expected to help moderate the upcoming consumer price index.

Leader projects a 0.1% monthly decrease in the June inflation index, followed by a 0.2% rise in July, with an annual inflation rate forecast of 1.6%. Meanwhile, in the US, the dollar weakened against major currencies for two consecutive days. Minneapolis Federal Reserve President Neel Kashkari, a voting member of the Federal Open Market Committee, revised his outlook at a Colorado conference, now anticipating one interest rate hike this year instead of a cut. He emphasized that this is an initial estimate and future economic data will guide further decisions.