Israel Monetary Policy January 2022

Israel: Bank of Israel leaves rates unchanged in January

At its 3 January meeting, the Bank of Israel (BoI) left the policy rate at 0.10%.

The decision to keep rates at their current level was driven on one hand by a desire to support activity amid economic uncertainty generated by Omicron. At the same time, inflation and inflation expectations are both within the Bank’s 1.0%–3.0% target range, while inflation is low compared to other OECD countries, meaning there was little pressure to hike.

In its communiqué, the BoI repeated its pledge to adopt an “accommodative monetary policy for a prolonged time”. However, most of our analysts now see a rate hike to 0.25% by the end of this year as the strong economy allows the withdrawal of some stimulus, with only a few panelists seeing rates unchanged in 2022.

Analysts at Goldman Sachs are among those who still see rates unchanged this year:

“We do not expect any rate hikes before 2023 given the downside risks from the Omicron variant, our forecast for inflation to fall […] and our constructive views on the shekel.”

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