Analysts say next week’s BoI rate hike won’t be the last

There is an analysts’ consensus that the Bank of Israel Monetary Committee, chaired by Governor Prof. Amir Yaron, will raise the interest rate on Monday by 0.25% to 4.5% – a ninth consecutive rate hike.

Earlier this month Yaron said, “Inflation has remained sticky worldwide and not just in Israel, and it particularly occurs in the service sector. We are determined to cut inflation to the target range (1%-3%) and if that means continuing to raise rates that is what we will do.” Such statements have prepared the market for a more hawkish approach by the Bank of Israel in tackling inflation.

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IBI Investment House chief economist Rafi Gozlan said, “Negative developments in the world and the unstable banking system have led to a higher likelihood of a 0.25% hike.” Gozlan believes that next Monday’s hike will not be the last in the coming year. “The final interest rate will reach 5% already in the coming months. At the moment because of the uncertainty in the market it is too early to talk about a change of direction in the Bank of Israel’s future rate decisions.

Psagot chief economist Guy Beitor explains, “Firstly, inflation in Israel continues to be high as the last two indices have surprised upwards.” Psagot now believes that the markets are pricing in further increases in the Bank of Israel interest rate. So the likelihood of further increases in the bank’s interest rate is high. In addition, the trends seen in the market point to future directions. Beitor points out that the futures contracts contain, in his estimation, an interest rate reduction by the Bank of Israel in about a year.

Published by Globes, Israel business news – en.globes.co.il – on March 30, 2023.

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