(Bloomberg) — Israel refrained from cutting interest rates on Monday, with the central bank on alert for risks of a wider war while an economic bounce-back this year adds to worries about inflation.
The monetary committee left the key rate at 4.5%, surprising most economists surveyed by Bloomberg, who expected a second straight reduction of a quarter percentage point. The shekel pared losses and traded little changed after the announcement.
The central bank repeated its guidance from January, saying it’s “focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity,” according to a statement accompanying the decision.
“There is a great amount of uncertainty with regard to the expected severity and duration of the war,” it said. “The Committee’s assessment is that there are still a number of risks of a potential acceleration in inflation.”
A pause reflects the competing priorities pulling at policymakers as the war against Hamas approaches its sixth month. Though mindful of risks to the economy after a near-record contraction last quarter, the central bank has also warned that the government’s heavy spending in response to the conflict could be an obstacle to further monetary easing, in addition to concern over shekel volatility, geopolitics and credit rating downgrades.
Judging by the slowdown in price growth in recent months, ample room is available for the Bank of Israel to provide more stimulus. The Bank of Israel’s research department projects the interest rate at 3.75%-4% in the fourth quarter of 2024, an outlook that Governor Amir Yaron has said could imply as many as four cuts this year.
By skipping a rate cut, Israel also aligns more closely with policies of global central banks.
US Federal Reserve officials have recently made clear they are in no rush to reduce rates. Several policymakers at the European Central Bank are stressing that monetary easing can’t begin until more data arrives in the coming months.
Barclays Plc economists including Brahim Razgallah said before Monday’s announcement that a pause in Israel was likely “due to heightened geopolitical uncertainty, the delay in Fed cuts, gradual economic recovery and the Bank of Israel’s cautious communication.”
Relative calm has so far prevailed in Israeli markets, despite a downgrade earlier this month by Moody’s Investors Service, Israel’s first-ever sovereign rating cut.
Since that decision, the shekel has been the second-best performer among a basket of 31 major currencies tracked by Bloomberg, a rally helped by gains in global tech stocks. It’s trading at a level stronger than before the war, up more than 12% after reaching an 11-year low in late October.
Although Israel’s rate differential with the US shrank with a cut to start the year, its official borrowing costs are near 2% when adjusted for inflation, comparable to Canada’s and a bigger buffer than in developed economies from the UK to the eurozone.
Annual Israeli inflation was slowing or unchanged in all but one of the past 12 months, entering the government’s 1%-3% target range for the first time in over two years.
But a ramp-up in government spending is raising the risk of sticky inflation, especially if worker shortages endure, as higher shipping costs add to pressures.
The future course of the conflict presents the biggest uncertainty of all, highlighted by the threat that the fighting could spread along Israel’s northern border where its military has been exchanging fire with Iran-backed Hezbollah.
An economic slowdown at the end of last year also contrasts with signs of a quick rebound so far in 2024, especially in private consumption and a labor market that’s seen unemployment fall sharply since a spike in October. The Israeli Purchasing Managers’ Index in January shifted back into expansion from contraction, according to Bank Hapoalim.
“The Bank of Israel will wait for the April decision in order to continue reducing the interest rate,” Gil Bufman, Bank Leumi’s chief economist, said before Monday’s decision.
–With assistance from Joel Rinneby.
(Updates with shekel, central bank comments starting in second paragraph.)
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
