Will The Shekel Respond To Rate Cuts?

January 2007 | Market Strategy

The Bank of Israel (BoI) has cut its key lending base rate by 25bps to 4.25%, and is, for the first time in history, 100bps below the US Federal Funds Rate. While we had anticipated a hold in interest rates, the decision is not entirely surprising. Our main argument in calling for a hold in rates was that to cut rates further would risk causing a spike in inflation in certain sectors of the economy. This remains a risk, and we will be watching the various components of CPI carefully going forward.

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