Central Banks
War Budget Casts Shadow Over Israel’s First Rate Cut Since Covid
- Rapid shekel rebound, slowing inflation set stage for decision
- Governor warns of impact on rates from ‘risky fiscal policy’
Carmel Market in Tel Aviv.
Photographer: Kobi Wolf/BloombergThis article is for subscribers only.
Israel’s central bank warned the government’s fiscal response to the war against Hamas risks pushing the country into greater debt and could be an obstacle to further monetary easing, after it cut interest rates for the first time since the height of the global pandemic in 2020.
The monetary committee on Monday ended a pause in place since July and lowered its key rate to 4.5% from 4.75%, as predicted by most economists. Markets are betting rates will fall below 3.4% by the end of 2024.