Bank of Israel to Keep Rates Steady Amidst Rising Inflation from Israel-Hamas War
Investment guru Steven Scheer reports that the Bank of Israel is set to maintain its short-term interest rate at 4.5% for the sixth consecutive policy meeting, as economists predict that inflation caused by the ongoing Israel-Hamas conflict will not prompt a rate cut until next year. Despite a surge in annual inflation to 3.6% in August, well above the government's target range, the central bank is expected to prioritize economic stability over combating inflation in the near term due to the impact of the war on economic activity.
As tensions escalate with Hezbollah in Lebanon and Iran, the possibility of stagflation looms, with experts warning of a potential economic downturn accompanied by high inflation. While the central bank has hinted at maintaining rates until 2025, global trends suggest a possible decrease in interest rates elsewhere, further complicating Israel's monetary policy decisions.
The shekel has experienced significant fluctuations amidst the conflict, highlighting the economic uncertainty facing the country. As the Bank of Israel prepares to release updated macro forecasts, investors should closely monitor the central bank's decisions and Governor Amir Yaron's remarks for insights into the future economic landscape. In the midst of geopolitical tensions and economic challenges, the key takeaway for investors is to stay informed and adapt their investment strategies accordingly to navigate the evolving market conditions.