Israel Monetary Policy July 2023

Israel: Bank of Israel keeps rates unchanged in July

At its 10 July meeting, the Bank of Israel (BoI) kept the policy rate at 4.75%, following 465 basis points of tightening since early 2022.

The decision was driven by a slight decline in inflation in recent months, and by one-year inflation forecasts that were within the Central Bank’s target range of 1.0–3.0%.

Looking forward, the BoI said it was prepared to hike rates again if inflation does not moderate. Most of our analysts expect rates to remain unchanged through end-2023. However, risks appear skewed to the upside due to the weak shekel, which is being depressed by investors’ concern over the government’s attempts to weaken judiciary independence.

Giving their take on the monetary policy outlook, analysts at Goldman Sachs said:

“We think that inflation has now peaked and, on our baseline projections, that it is on track to decline gradually over the remainder of the year. We think that it could fall below +4.0%yoy by the time of the next MPC meeting on September 4th, reducing hawkish pressures on the BoI.”

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