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Bank Of Israel Analyst Views

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  • *Natwest see the balance of risk tilted towards a 50bps increase compared to the near consensus view of 25bps. Central banks these days are data dependent. With higher than expected economic growth, inflation yet to peak and a 3.8% drop in the ILS since the start of February, data argue for the BoI to be overly cautious on inflation as opposed to complacent. They still see value in paying the front-end of the ILS FRA curve.
  • *Goldman Sachs base case is for the BoI to slow the pace of tightening from +50bp to +25bp. However, given the persistent weakness of the Shekel since the start of the year, as well as relatively strong incoming data, they think that the risks of a hawkish surprise have increased materially and the BoI could keep the pace of tightening at +50bp.
    • GS now see mostly hawkish risks to their terminal rate forecasts of +4.00% and do not expect much room for rate cuts in the next 12-months.
  • *Barclays expect the BoI to hike rates by 50bp, and to broadcast hawkish rhetoric indicating that tightening will continue. In their view, this will keep pressure on the front end of the curve, hence they still see value in paying 1y ILS IRS and are moving their target to 4.60. On the FX side, the ILS is now trading more than 5% off its NASDAQ “parity”, amid local political dispute. A hawkish BoI should give some support to the ILS.
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  • *Natwest see the balance of risk tilted towards a 50bps increase compared to the near consensus view of 25bps. Central banks these days are data dependent. With higher than expected economic growth, inflation yet to peak and a 3.8% drop in the ILS since the start of February, data argue for the BoI to be overly cautious on inflation as opposed to complacent. They still see value in paying the front-end of the ILS FRA curve.
  • *Goldman Sachs base case is for the BoI to slow the pace of tightening from +50bp to +25bp. However, given the persistent weakness of the Shekel since the start of the year, as well as relatively strong incoming data, they think that the risks of a hawkish surprise have increased materially and the BoI could keep the pace of tightening at +50bp.
    • GS now see mostly hawkish risks to their terminal rate forecasts of +4.00% and do not expect much room for rate cuts in the next 12-months.
  • *Barclays expect the BoI to hike rates by 50bp, and to broadcast hawkish rhetoric indicating that tightening will continue. In their view, this will keep pressure on the front end of the curve, hence they still see value in paying 1y ILS IRS and are moving their target to 4.60. On the FX side, the ILS is now trading more than 5% off its NASDAQ “parity”, amid local political dispute. A hawkish BoI should give some support to the ILS.