2023-12-19 08:09:00
Title: Israeli Stock Market Trails New York, Interest Rate Cut Expected
The stock market in Israel is lagging far behind the leading indexes in New York, which are cruising at record levels. Expectations for a series of interest rate cuts by the Federal Reserve in the coming year have only fueled the discrepancy.
While the market predicts three cuts by the Fed, including the possibility of a fourth, JP Morgan and Citibank anticipate an interest rate cut of 0.25% in Israel as soon as the next announcement in two weeks.
This assessment comes in the wake of encouraging inflation data published in Israel, where the housing section surprised and tipped the scales. In November, the consumer price index decreased by 0.3%, leading to an annual inflation rate of 3.3%. This was largely attributed to an interest rate cut in Israel.
The unexpected decrease in the index was influenced by the sharp increase in the exchange rate of the shekel, resulting in a 5.7% drop in travel prices abroad. Prices of owned housing services also decreased by 0.7%, possibly due to ongoing geopolitical tensions.
Foreign banks see the surprise decrease in the consumer price index as a sign of an impending economic slowdown, pressuring the Bank of Israel to act sooner rather than later. Bank Hapoalim economists also foresee an interest rate cut in Israel before the US, further indicating the mounting pressure on the central bank.
While the good inflation data in Israel and the strengthening of the shekel may initially support interest rate cuts, the recent increase in energy prices due to the Houthi threat has the potential to change the economic landscape. The threat has already forced the US to form a coalition for the free passage of ships in the Red Sea, and the Bank of Israel will be keeping a close watch on the situation.
Overall, despite the stock market’s lag and anticipation for an interest rate cut in Israel, the potential impact of geopolitical tensions on inflation remains a significant factor to consider in the coming weeks.
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