Israel’s Monetary Policy November 2022

At its meeting on November 21, the Bank of Israel (BoI) raised the interest rate from 2.75% to 3.25% – the highest level since 2011 and means that rates have risen by 315 basis points this year.

The decision to raise rates was again driven by the desire to ease price pressures on a large scale, with inflation above the central bank’s target range of 1.0-3.0% so far this year. Moreover, the central bank’s decision could have had one eye on supporting the shekel and calming the housing market. Low unemployment and strong economic activity provided room for the bank to harden its stance.

In its statement, the Bank of England indicated that interest rates will continue to rise in the future. This is in line with committee members’ expectations, which are for about 40 basis points of additional tightening next year.

Giving their views on the monetary policy outlook, analysts at Goldman Sachs said:

We believe that with the shekel weakening over the course of this year, it will be much more difficult to bring inflation back to the target level without supporting the exchange rate. Given our outlook for inflation and exchange rate pressures, we expect further hikes in BoI rates, reaching a final rate of +4.00% next year.”

The next consensus forecast will be published on November 29.

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