Bank of Israel: It is not expected to raise interest rates on Monday – Rise is likely in the coming months

The Bank of Israel is expected to keep short-term interest rates unchanged this week, its 14th such decision, although analysts expect a “hawkish” tone that could lead to higher interest rates in the coming months as they rise. inflationary pressures, according to Reuters.

All 12 economists polled by Reuters predict that the central bank’s Monetary Policy Committee (MPC) will keep the benchmark interest rate at a record low of 0.1%, with the decision to be announced tomorrow Monday.

While other countries have faced rising inflation, Israel has not seen a similar picture, mainly due to the strong shekel that has moved to a high of 26 against the dollar and has kept import prices low. Annual inflation stood at 2.4% in November, within the official 1-3% target.

Last month, Bank of Israel Governor Amir Yaron told Reuters that the central bank was in no hurry to raise interest rates as inflation was under control.

However, analysts say an increase in inflation is inevitable, especially with the tightening of the labor market in which the broader measure of the unemployment rate has fallen to 6.5%.

“Inflationary pressures are likely to persist and require further increases,” BofA Securities economists said in a report, predicting that interest rates would rise from the second quarter to close at 20% in 2022.

All six interest rate agencies had voted to keep the benchmark interest rate at 0.1% after their previous meeting on November 22nd, while a policymaker had voted in favor of raising the interest rate to 0.25% on October 7th.

The Israeli economy, according to the bank’s latest estimate in October, was expected to grow by 7% in 2021 and is projected to grow by 5.5% this year.

In Monday’s decision, the bank will issue updated macroeconomic forecasts and Yaron will give the quarterly press conference.