Rate Hikes To Put Upside Pressure On Shekel

The Bank of Israel (BoI)'s decision to raise its headline interest rate for January by 25bps to 1.25% at its end-December meeting dovetails with our relatively hawkish call for 250bps of cumulative rate hikes (to 3.50%) over the course of 2010. This was the second consecutive month in which the BoI chose to hike by 25bps, and while the bank could well proceed cautiously over the coming months owing to the fragility of the domestic (and global) economic recovery, we expect the pace of the tightening cycle to accelerate in the second half of 2010.

To read the full article, please choose one of the following options: