The market was in for a surprise when the Bank of Israel’s Monetary Committee decided not to lower interest rates at its last meeting. The decision came as a shock to many analysts who had expected a rate cut from 0.25% down to 0.10%. Professor Amir Yaron, Governor of the Bank of Israel, put away his scissors, and took out his change purse - opting to tackle the strengthening shekel with a USD shopping spree.
Currently, the economy is relatively stable. Despite the latest OECD forecasting a 2.9% 2-year growth rate as opposed to an earlier 3.3% prediction, the number is significantly higher than the average of all OECD countries. Unemployment is at a record-breaking low, and Israelis are making more than ever as household income grew faster than expenditure.
Despite the positive state of affairs, Yaron was likely concerned about the future. A government has yet to form, and the country is operating on a continuation budget. This instability may lead to an economic slowdown, which makes it more likely that the Bank of Israel will cut interest rates down the road.