Interest rates

Bank of Israel saw rates hold, but some analysts call for cuts: Reuters poll | The powerful 790 KFGO

By Steven Scheer

JERUSALEM (Reuters) – The Bank of Israel is expected to leave short-term interest rates unchanged this week, its 13th consecutive move, although some analysts believe it should cut rates to stop the shekel from sitting at highest in 26 years against the dollar.

The 16 economists polled by Reuters believe the central bank’s Monetary Policy Committee (MPC) will keep the benchmark rate at an all-time low of 0.1% when the decision is announced at 4:00 p.m. (2:00 p.m. GMT) on Monday.

Before the last meeting on October 7, analysts generally believed the next change would be a hike as early as 2022 in the wake of rising inflation and a rapid economic rebound as part of a widespread deployment of the COVID-vaccine. 19. A member of the MPC voted to increase rates to 0.25% at this meeting.

Since then, the shekel gained up to 7% against the dollar until the end of 1995 and is the best performing emerging currency since the start of the pandemic, while inflation in October and GDP growth in the third quarter were below expectations.

Analysts said one of the main goals of Monday’s meeting would be how to handle the shekel since the bank’s plan to buy $ 30 billion in foreign currency came to an end at the end of October, although there has had a few interventions since.

Despite the anger of exporters, policymakers appeared to let the shekel strengthen as it lowers import prices and helps contain inflation.

“There are many reasons for the bank to cut interest rates, given the shekel soaring, inflation moderation, fear of the corona virus renewing and more. But it is likely to leave it unchanged, mainly because other central banks “start to raise rates,” said Amir Kahanovich, chief economist at the Excellence Investment House.

Israel’s inflation rate rose to 2.3% in October, from an 8-year high of 2.5% in September, to stay within the government’s annual target of 1-3%.

Based on bond yields, the rate is expected to rise to 2.8% over the next 12 months, although economists are forecasting an average of 1.8%.

The economy grew 2.4% on an annualized basis in the third quarter from the previous three months, well below expectations of 6%. The government and the central bank are forecasting 7% growth in 2021.

This week’s meeting is the first for former US Federal Reserve chief economist Naomi Feldman, who succeeded Reuben Gronau.

(Reporting by Steven Scheer; Editing by Andrew Heavens)