Leader’s chief economist: “Bank of Israel will stop buying bonds”

Leader’s chief economist: “Bank of Israel will stop buying bonds”
Leader’s chief economist: “Bank of Israel will stop buying bonds”
Yonatan Katz (photo by Zvika Dor)

Lider’s chief economist, Yonatan Katz, one of Israel’s top economists, estimates today that the Bank of Israel will announce on Thursday the halting of bond purchases and the start of a trend of raising interest rates. The bank that will indicate an interest rate of 0.25% at the end of 2022.

Katz notes in his weekly review that the inflation forecast has recently risen from 1.3% to 1.5%, with his estimate that inflation for the 12 months ahead will rise to 1.2%. It should be noted that the assessment at present does not speak of an inflationary outbreak but it is certainly an inflationary escalation that can easily turn into such a fatal outbreak.

“Developments in the labor market will be critical in looking at the inflation environment. In the world in general and in the United States in particular, there is a fear of significant wage pressures due to a shortage of workers, especially in the hospitality and leisure industry, but not only. Therefore, it is important to correctly analyze the state of the labor market, both in terms of supply and demand for workers.

“The main index for estimating the demand for workers is the number of job vacancies in the economy, which stands at 134,000 jobs (well above the level on the eve of the corona of about 95,000). % In August.) The supply side of potential employees can be estimated by analyzing labor force and population surveys of working age.

“A discount must be made for the participation rate (which decreased during the corona period) in the coming year. In our estimation, it is likely to gradually return to the corona evening rate. Except for a relatively small segment of ‘early retirees’ Even “unofficial” work from home or unreported is a source of income that contributes to the product.

Assuming that the participation rate returns to 63%, then today there is potential for 170,000 job seekers. The number of 170,000 job seekers exceeds the number of job vacancies 134 (thousand) so it is unlikely to expect significant wage pressures in Israel (except of course high-tech industries There is a real shortage).

“In the United States, the gap is completely different: 10.9 million vacancies compared to 7 million potential job seekers (with 2.5 million being 55 years old and some of whom are considering retiring early from the labor market).” Katz writes.

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Leaders chief economist Bank Israel stop buying bonds

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