The shekel weakened slightly in morning local foreign currency trading against both the dollar and the euro, in response to Israel's Consumer Price Index (CPI), which was published on Friday. The CPI rose 0.4% in June as expected.
In inter-bank trading, the shekel-dollar exchange rate is up by 0.5%, at NIS 3.44/$. The shekel-euro exchange rate is up by 0.2%, at 4.872/€.
In international markets, the euro has weakened by 0.4% against the dollar and is trading at $1.406/€.
Israel's Consumer Price Index (CPI), which was published on Friday, rose 0.4% in June as expected. The inflation rate had risen for two consecutive months and has risen 4.2% over the last twelve months.
Following the rise of the CPI, economists at Excellence Nessuah say that, "the interest rate decision for next month will not be simple." They explain that the renewed rise in short-term inflation expectations (1-3 years), which are at the upper limit, and a renewed rise in energy prices, will only make the decision even harder.
Housing prices are expected to rise (according to the Central Bureau of Statistics), as well as food prices, and current estimates are that there will be accelerated global growth in the next six months, which will once again accelerate local growth. In addition, central banks in developing countries (with "problems" similar to Israel) have recently increased interest rates. On the other hand, the debt crisis in Europe and in the US, the economic uncertainty about growth rates and the slowing down of growth in Israel and globally, and another delay in the US and in Europe in raising interest rates, increase the likelihood that the interest rate this time around will remain unchanged.
The economists believe that, "if there is not a significant deterioration in the markets, the Bank of Israel will raise interest rates by 0.25% as a result of the recent increase in inflation rates and the continuing rise in housing prices."
In contrast, Meitav Investment House Ltd. chief economist and strategist Ron Eichel believes that, "the gap between current Bank of Israel interest rates and interest rates that are considered 'normal', allows degrees of freedom in the pace of interest rate rises, so that it will be possible to step up the pace if necessary even without raising interest rates in July."
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