Amir Kahanovich, The Phoenix-Excellence
28/11/2021
Following the Bank of Israel’s “ionic” interest rate decision, which helped weaken the shekel, Governor Yaron was interviewed by Reuters on Tuesday and took the “pigeons” to another stage when the highlight was that he was not even sure that the interest rate tool was relevant to inflation: “It is not clear whether monetary policy is still effective in influencing inflation, given globalization, the ability to buy online that lowers prices, and the advancement of technology that makes production and consumption more efficient.” Following his remarks, the yields on BIM’s deepened into the negative territory and the shekel fell sharply against the currency basket, and especially against the dollar, which soared in the world against the backdrop of a “hawkish” pad and weakness in Asia and Europe:
US yields jumped to a high yesterday since the pre-Corona following the release of strong macro data, Including the acceleration of consumer prices (PCE) from an annual change of 4.4% to 5.0%, a slight increase in the Consumer Confidence Survey of the University of Michigan, a higher than expected increase in household income and expenditure data, a marked decrease in the number of unemployment benefit claimants, especially after publication Minutes of the latest Fed decision from which it emerged that a number of members support a faster completion of the bond purchase plan:
The Fed protocol tried to be balanced but most of the attention was caught by the willingness of some of the members to accelerate the pace of shrinking bond purchases – From the minutes: “Fed members see in most cases the high level of inflation reflects factors that are expected to be temporary, but estimated that the inflation pressures may last longer than previously estimated.” This is due to the ongoing uncertainty regarding developments in the supply chain, production logistics and the course of the virus. A number of participants emphasized that a patient attitude towards the incoming data remained appropriate To allow a careful assessment of developments in the supply chain and their implications for the labor market and inflation. “However, some Fed members expressed concern that the high level of inflation would raise it in long-term inflation expectations which could make it difficult for the commission to achieve 2 percent inflation in the long run. More with the bond purchase plan to leave the Fed flexible, so that if necessary the interest rate hikes can be brought forward. But noted that they would not want to cause the acceleration in the rate of reduction in purchases to transmit anything about interest rates. They stressed That the criteria for raising interest rates have remained stricter than those they are looking for in reducing bond purchases.
The rise in short-term yields is burdensome The rise yesterday in the short-term yields in the US was not reflected in the long-term yields either, when at very long they even tended to decline, which caused the curve slopes to continue to moderate. The U.S. stock market is struggling to keep rising despite fantastic macro dataIn Europe, the market is prone to declines, when the eruption of the corona on the continent and in the Asia-Pacific also weighs heavily on it. The Chinese government has urged local governments to increase investment To deal with the slowdown in growth, and the Bloomberg Agency’s announcement that the Chinese city of Chengdu (16 million residents) has sought to alleviate the cash shortage of real estate developers, raising concerns that beneath the surface the problem is big.
US flooded with homes for sale – U.S. home sales data for recent months updated significantly downward And it turns out that as of the end of October there were 389,000 new homes for sale in the US, the largest number in 13 years. Sell supply, compared to 3.6 months at the beginning of the year. It is possible that developers see the rising prices and prefer to wait with the sale.
Today, the Bank of Israel will publish the combined index For economic activity in the economy in October. But it seems that no matter how much he surprises and where, the bank does not dare to raise interest rates, when he wants to see the shekel continue to calm down.
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