Israel Monetary Policy January 2024

Israel: Central Bank kicks off loosening cycle in January

At its 1 January meeting, the Bank of Israel (BOI) lowered the policy rate by 25 basis points to 4.50%, meeting the expectations of most market analysts. The move marked the first cut since April 2020 and came on the heels of November’s hold and a cumulative increase of 465 basis points between early 2022 and May 2023.

The move was driven by the need to reduce uncertainty amid the ongoing war with Hamas, as the Bank tried to stabilize markets, while ensuring price stability and supporting overall economic activity. Moreover, inflation has continued to decline, and inflation expectations remained anchored within the BOI’s 1.0–3.0% target range. All these factors gave the Bank ample room to kick off its loosening cycle.

The communiqué was void of forward guidance. However, the Bank shifted its focus toward supporting economic activity amid the war and declining inflation. All of our panelists see further cuts this year.

The next meeting is set for 26 February.

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