BoI will probably cut rate next time say analysts

• Published date: 09 April 2024
• Author: Aharon Katz
• Publication title: Globes (Rishon LeZion, Israel)

Mizrahi Tefahot Bank chief strategist Yonie Fanning says, "On the whole, central banks like to start reducing interest rates when it is already pretty clear that the time has come to do so." He says expectations of an interest rate cut were high until the shekel started to weaken a few days ago. "Many of the basic conditions in the Israeli economy are conducive to further interest rate cuts. In fact, had the latest geopolitical escalation occurred a week later or a week earlier, we probably would have seen a rate cut," Fanning says

Bank Leumi chief economist Gil Bufman says that the decision not to cut the interest rate now, despite the fact that inflation has come within the target range and the high level of the current rate "was explained by significant uncertainty in geopolitical factors."

"Israel's risk premium, as measured by the CDS premium, is still fairly high, and the Bank of Israel attributes great importance to that," Bufman says.

Commenting on the Bank of Israel's economic forecast, Bufman says that the bank fears a situation in which in some parts of the economy there is a gap between demand and impaired supply, specifically in the construction sector.

Fanning says that, looking ahead, economic condition...