Israel: Bank of Israel hikes for sixth straight meeting in November
November 21, 2022
At its 21 November meeting, the Bank of Israel (BoI) raised the policy rate from 2.75% to 3.25%—marking the highest level since 2011 and meaning that rates have risen by 315 basis points this year.
The decision to hike was once again driven by a desire to dampen broad-based price pressures, with inflation running above the Central Bank’s 1.0–3.0% target range so far this year. Moreover, the Central Bank’s decision could have also had one eye on supporting the shekel and cooling the housing market. Low unemployment and robust economic activity provided the space for the Bank to tighten its stance.
In its communiqué, the BoI suggested that interest rates would continue to rise going forward. This is in line with our panelists’ forecasts, which are for around 40 basis points of additional tightening next year.
Giving their take on the monetary policy outlook, analysts at Goldman Sachs said:
“We think that with the Shekel weakening over the course of this year, it will be much harder to bring inflation back to target without the support of the exchange rate. Given our inflation outlook and the exchange rate pressures, we forecast more rate hikes from the BoI, reaching a terminal rate of +4.00% next year.”
Author: Oliver Reynolds, Economist