The Bank of Israel then refers to the strong growth in Israel, but noted that in the second half the growth slowed down compared to the first half. However, according to the Bank of Israel, the labor market continues to be very tight and the governor even said that they will continue to look especially at wage trends in the business sector, where wages have risen rapidly over the past year. And it doesn’t end with inflation and growth, the Bank of Israel also started to give us hints that they are looking beyond the price increases we see today in the real estate market and noted that the number of construction starts and permits continues to be very high (meaning more supply) and on the other hand, they see a decrease in the number of transactions (meaning less demand) – our immediate interpretation is that if they expect more supply and less demand, the Israeli real estate market will start to cool down soon, as indeed we estimate.
More in-
Finally, the Bank of Israel continues to emphasize that the global slowdown continues and the risk of a recession is increasing. That is, it is definitely the Bank of Israel, even though it raised the interest rate by another 0.5% (to the level of 3.75%), it has begun to prepare the ground for the end of the cycle of interest rate increases. In addition, this is also derived from the research division’s updated forecasts where they expect the Caribbean to be at 4.0% at the end of the year – a distance of one increase of 0.25%. In our estimation, the global recession is around the corner, and the high volatility in the markets will continue – this, together with a gradual decrease in inflation starting in February, constitute very clear background conditions for stopping the course of interest rate increases. In the bottom line, the messages from the Bank of Israel in the headlines of the announcement were very ionic in our estimation (as much as possible raising interest rates) and signal to the market that the cycle of interest rate hikes is close to ending.