Bank of Israel Governor Amir Yaron is keeping interest rates steady at 4.5%, marking the seventh straight hold this year as the bank navigates between wartime pressures and inflation concerns.
The decision comes as market sentiment shifts dramatically. Just weeks ago, traders were betting on rate hikes. Now, they're eyeing cuts as early as mid-2025, reflecting growing optimism about an eventual wind-down of the conflict.
"We're looking at two potential rate cuts in the second half of next year," says Jonathan Katz, chief economist at Leader Capital Markets. But inflation could throw a wrench in those plans. October's prices jumped 0.5%, keeping annual inflation stuck at 3.5%, while core inflation crept up to 3.29%.
Phoenix Insurance's chief economist Matan Shitrit warns the squeeze isn't over: "Inflation's likely to keep climbing into early 2025, especially once the VAT hike kicks in this January."
A stronger shekel and possible easing in fuel costs might help, but for now, Yaron's keeping his powder dry.
Globes contributed to this article.
