Economy

Bank of Israel to stay on hold as inflation eases but hike cycle may not be done: Reuters poll

Published

8 months ago

September 4, 2023

Bank of Israel to stay on hold as inflation eases but hike cycle may not be done: Reuters poll

By Steven Scheer

JERUSALEM (Reuters) – Israel’s central bank is expected to leave short-term interest rates unchanged this week, as it did in July with inflation easing, but the rate hike cycle may not be over with the shekel hovering around a 3 1/2 year low.

Of the 16 economists polled by Reuters, 15 projected the Bank of Israel would hold its benchmark rate at 4.75% – its highest level since late 2006 – when it announces its decision on Monday at 4 p.m. (1300 GMT). One forecast a 25 basis point increase to 5.0%.

“The weaker shekel and political uncertainty will likely keep it cautious and skews risks to the upside – another 25 basis point hike,” said Barclays economist Zalina Alborova.

Israel’s annual inflation rate dropped to 3.3% in July from 4.2% in June, its lowest rate since March 2022 but above a government target range of 1-3%.

But the shekel, which has a pass-through effect on inflation of as much as 20%, weakened 4% further in August versus the dollar and stands at a 3.80 rate – its weakest level since March 2020.

The shekel has depreciated 8% so far in 2023 on the heels of plans by Prime Minister Benjamin Netanyahu’s government to trim the powers of the country’s Supreme Court as part of an overhaul of the judiciary. The plan has drawn wide public opposition, spooking foreign investors, pushing down capital inflows and raising the cost of imported goods.

“The central bank will leave the door open for further rate hikes and maintain its relatively hawkish stance, given that the shekel remains weak and exposed to domestic political developments,” said Goldman Sachs economist Tadas Gedminas.

“However, the relatively dovish incoming inflation data raise the bar for how much FX developments would have to worsen to warrant additional rate hikes at this juncture.”

Morgan Stanley’s Georgi Deyanov said he changed his call to no move on Monday from a hike citing recent inflation data but gives a 40% chance of a further rate increase down the line.

In contrast, Citi believes that with inflation trending downward, the rate could dip below 3% this year and average 2.3% in 2024, with strategist Bhumika Gupta saying inflation prints the past two months have been lower than expected.

“A rate cut in the first quarter next year could be likely, however, growth remains robust and exceeding expectations, which could be a headwind,” she said.

Israel’s economy is expected to grow around 3% in 2023.

The Bank of Israel left its key rate unchanged in July after an aggressive rate hike cycle that took the rate from 0.1%. Minutes of the meeting showed policymakers were concerned the shekel could keep inflation from moving back to its target and that further rate increases were possible.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

4 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

4 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

4 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.