Bank of Israel Tees Up More Rate Hikes After Surprise First Step

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The Bank of Israel delivered an interest-rate hike that exceeded most forecasts to signal the start of a rare monetary tightening cycle in the face of inflation it now expects to peak later and at a higher level, according to the deputy governor, Bloomberg News reported. Andrew Abir, a voting member of the monetary committee and the central bank’s No. 2 official, said Israel’s inflation -- currently above the government’s 1%-3% target range -- will likely only begin to decline in the second half of the year. The worsening outlook underscored the importance of Israel’s first rate hike in over three years, he said. “It’s a process of raising interest rates in order to bring inflation down back to the middle of the target,” Abir said in an interview on Tuesday. “The pace of those interest rate hikes will be data-dependent. But I don’t expect it to be a single hike and that’s it.” The decision on Monday to raise the benchmark by a quarter point to 0.35% completed a hawkish policy pivot away from a period of near-zero borrowing costs and toward Israel’s first cycle of rate hikes in more than a decade. While most economists predicted a smaller move of 15 basis points, Abir said a rate hike of that size “seems a little bit nothing to start with.” Read more.
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