Investors’ eyes are on the Bank of Israel’s interest rate announcement today (Thursday) at 4:00 PM, after which the Bank will hold a press conference. The Bank of Israel is not expected to change the level of interest rates in the economy, but most market economists estimate that Governor Amir Yaron is expected to announce the termination of the monthly bond purchase program against the background of indications of continued strong growth and declining morbidity.
“If the Bank of Israel wants to signal to the markets that the very expansionary policy, by definition, is about to moderate, it will have a convenient combination of rising inflation above the mid-range range; a decrease in local morbidity; Mizrahi Bank. In this context, Menachem estimates that the Bank of Israel will continue with the global dollar purchase program and will not try to moderate the devaluation of the shekel.
Along with the interest rate announcement, the Research Department of the Bank of Israel will publish the economic forecast. “Compared to the forecast from three months ago, it is likely that by 2021 there will be no real change in the GDP growth forecast (about 6%), but the unemployment forecast (which stood at 10.8%) will fall, the inflation forecast (1.7%) will rise and the government deficit forecast ( 7.1% of GDP (“spinach”, estimates Menachem. “Such a scenario would make it easier for the Bank of Israel to reason beyond a less expansionary monetary policy. We previously thought that the plan would actually be extended, but it turns out that except for the labor market, which is still faltering, economic activity has recovered enough.”
Menachem expects the Knesset to make a number of changes or hints in the general guidelines of the announcement in relation to the August announcement. Regarding health risks, moving from a description of “overcoming” to “stabilizing” (at least in Israel). Defining the monetary policy that will be adopted next as “expanding” instead of “very expanding”.
“At the same time, one should not rule out waiting another month, or making minor changes, due to factors such as: continued high unemployment in the economy, the question of the state budget still open. The budget has not yet been approved for second and third readings. Wait and do not add “noises” to the system.The appreciation of the shekel so far has delayed the rise in domestic inflation, which is significantly lower than that of the US, the eurozone and other developed economies. Strong volatility of stock markets and bonds. The Bank of Israel, like any central bank, will strive to begin every move in a way that is received as smoothly as possible in the markets. In our opinion, a possible announcement of the end of the purchase plan will be accompanied by a message that this does not mean that this is a move that will in itself bring the interest rate increase closer. This is how the Federal Reserve of the United States behaved in its latest announcement, “Menachem wrote.