Is the ionicity of the Bank of Israel growing? The interest rate decision helped weaken the shekel

by time news

| Amir Kahanovitz, Chief Economist, Phoenix-Excellence |

After the “pigeon” earlier this week of the Bank of Israel, which helped weaken the shekel, and raised 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.”

He went on to say that the yields on the Bank of Israel’s quotas deepened into the negative territory, and he recorded a sharp fall against the currency basket, and especially against, which soared in the world against the backdrop of a “hawkish” pad and weakness in Asia and Europe.

Yields on short-term US bonds jumped to a record high since pre-corona on Wednesday, following strong macro data, including an acceleration (PCE) from an annual change of 4.4% to 5.0%, a slight increase in the survey, higher-than-expected increase in household data and expenditure, Stands out in a number of grant seekers, especially after the recent announcement, from which it emerged that a number of members support a faster completion of the bond purchase program.

The Fed protocol tried to be balanced, but most of the attention was drawn to the willingness of some of the members to accelerate the pace of reducing bond purchases. From the protocol:

“Fed members see in most cases the high level of inflation reflecting factors that are expected to be temporary, but estimated that the inflation pressures may last longer than previously estimated.”

this,

“Because of the continuing uncertainty about supply chain developments, production logistics and the course of the virus. Several participants stressed that a patient attitude towards incoming data remains appropriate to allow a careful assessment of supply chain developments and their implications for the labor market and inflation.”

However, some Fed members have expressed concern that the high level of will provoke an increase in long-term inflation expectations which could make it difficult for the commission to achieve 2% inflation in the long run. A number of members suggested ending the bond purchase plan more quickly to leave the Fed flexible, so that if necessary the increases could be brought forward. More than those they are looking for to reduce bond purchases.

| The rise in short-term yields is burdensome

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Yesterday’s rise in short-term yields in the US was not reflected in the long-term yields either, as at very long they even tended to decline, which caused the curve slopes to continue to moderate.

The US stock market is struggling to continue to rise despite fantastic macro data, in Europe the market is prone to declines, with the corona outbreak on the continent also heavy, and the Asia-Pacific local index continues to decline, with negative indications from China in recent days. Investments to deal with the slowdown in growth, and the Bloomberg agency’s announcement that the Chinese city of Chengdu (16 million residents) sought to alleviate the cash shortage of real estate developers, raising concerns that beneath the surface the problem is big.

US flooded homes for sale: Data on U.S. homes in recent months have been significantly updated downward and it turns out that as of the end of October there were 389,000 new homes for sale in the U.S., the largest number in 13 years. This is not yet their pre-subframe level, so these stood at over 500,000, but at the current pace of construction is approaching them. At the current sales rate it will take 6.3 months to sell the 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. As homes enter the market the pressure on rising rental prices may be reversed downwards.

Today, the Bank of Israel will publish the combined index of 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.

The writer is the Chief Economist of Phoenix-Excellence. This review is provided as a service to readers only, and should not be construed as an offer, recommendation, substitute for the reader’s professional judgment or investment advice or investment marketing, purchase and / or sale and / or holding of the securities and / or financial assets mentioned or of securities and / Or any other financial assets.

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