The shekel has strengthened at the opening of this week's foreign exchange trading, with the Bank of Israel's interest rate decision for March due at 16:00 today. The shekel-dollar exchange rate is down 0.31% in comparison with Friday's representative rate, at NIS 3.8491/$, and the shekel-euro rate is down 0.16%, at NIS 4.3681/€.
The consensus among analysts is that the Bank of Israel Monetary Committee will decide to leave the interest rate unchanged, despite deflationary pressures in the Israeli economy and the shekel's substantial appreciation against the euro in recent weeks.
On the other hand, Itzik Noy, CEO of Smart Capital, says that "the negative inflation in the economy and the meteoric strengthening of the shekel against the euro (9.5% in the past three months) oblige the Bank of Israel to return to the activism of the summer of 2014 - a double interest rate cut."
FXCM Israel estimates that the Bank of Israel will not cut its interest rate. "Despite the negative CPI reading for January and the degree of appreciation by the shekel in the past month, the Bank of Israel will not cut its interest rate now. The fourth quarter growth figures were encouraging, and the US dollar can be expected to continue strengthening in the medium term. The Bank of Israel will probably cut its interest rate later on in the year only if deflationary pressures continue, and in the meanwhile it will make do with ad hoc intervention in the foreign exchange market, with the aim of encouraging the rising trend in the shekel-dollar exchange rate," FXCM writes in its market review this morning.
Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2015
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