Israel Monetary Policy April 2024

Israel: Central Bank keeps interest rates unchanged in April

At its 8 April meeting, the Bank of Israel (BOI) kept the policy rate unchanged at 4.50%, mirroring the decision at the February meeting which had followed January’s 25 basis-point cut.

The decision not to cut rates further was likely driven by the recovering economy and labor market, shekel depreciation and a rise in near-term inflation expectations. On the flipside, additional rate hikes were not warranted given that inflation is currently within the BOI’s 1.0–3.0% target range and that the war is still hampering the economy somewhat.

There was no explicit forward guidance in the Central Bank’s press release, with future inflation and the developments of the war likely to play a key role in determining monetary policy ahead. All of our panelists see further cuts this year given that inflation is forecast to remain well within the target range.

On the reading and outlook, Goldman Sachs analysts said:

“We think inflation momentum is likely to remain relatively benign in the near term and support inflation staying within the BoI’s 1-3% target range through this year. Furthermore, despite the recent period of Shekel weakness, the exchange rate remains stronger compared to September […]. […] our base case remains that rate cuts will resume at the next MPC in May and continue beyond, if the recent geopolitical uncertainty and Shekel’s weakness continues, we believe risks are tilted towards another on-hold decision.”

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