Ahead of the Bank of Israel's decision: Factors influencing the interest rate
The moderation of inflation and changes in the local labor market increase the probability of a significant step on Tuesday, while in the US a completely opposite trend is being recorded. Analysts at Leader Capital Markets provide their analysis.
Yonatan Katz and analysts at Leader Capital Markets have prepared a weekly economic review, focusing on several pressing issues, including the probability of an interest rate cut this week by the Bank of Israel, the shift in the local labor market, the speech by the Fed Chair, and the effects on the US economy and the bond market.
Key highlights from the review:
"The probability of an interest rate cut on Tuesday has increased. The moderation in the inflation environment, a relatively strong shekel, and some easing on the supply side in the labor market support a reduction in the interest rate. The increase in the participation rate in the main age group points to an easing of supply constraints in the labor market. On the other hand, the Bank of Israel has previously taken a cautious approach, especially during periods of recovery in economic activity."
Regarding the state of the US economy following the Fed Chair's speech, they stated:
"The hawkish speech by the Fed Chair increased the probability of an interest rate hike on 16.9. The Treasury is expected to issue 5.2 billion NIS in September, a relatively low fundraising pace that supports fiscal credibility."
Finally, they analyzed the bond market:
"A combination of an expected interest rate cut and a low bond issuance pace supports long-term instruments. A Fed interest rate hike may support a decline in long-term yields and a further flattening of the curve."
