Updated: Mar 9
Israel's economy seems to be doing well, at least, for the time being. Recent reports show a decline in the budget deficit, high growth rate, increased number of investments, and greater public consumption. The Consumer Price Index is declining while manufacturing imports, exports, retail trade, and services revenue are on the rise.
Nir Barkat stated at the Kohelet Policy Forum that Israel could be one of the "strongest economies in the world" within ten years.
Housing prices, though, are on the rise. The political stalemate is likely to continue following the March 2nd election, making it impossible to secure a 2020 budget. Coronavirus fears are shaking up the markets, and various industries have already taken a hit.
These factors were considered by the Bank of Israel when reaching their decision to keep the interest rate at 0.25%. Although inflation is below the target range, and the coronavirus is not expected to have a significant economic effect on Israel for the time being, the risk of a substantial crisis still exists. The Bank will, therefore, continue to monitor the economic environment and use other tools to tackle inflation, if need be.
The shekel strengthened following the announcement...like we needed any more of that! The Bank's comments following the decision indicated that the interest rate is unlikely to go down in the next few months. As a result, we now see the dollar, sterling, and euro remain at lows against the strong shekel. With elections, Purim and Pesach coming up we are going to see a lot more volatility in the rates as there will be less volume in the markets over that time.