Bank of Israel governor says interest rate cut ‘possible’ this year.
The governor of Israel’s central bank said on Tuesday that it would cut interest rates by one to two possible steps in the second half of this year, citing confidence that domestic inflation will slow in the coming months.
Inflation, which reached 3.2% in December, “is still above our target, which is between 1% and 3%,” Bank of Israel Governor Amir Yaron told CNBC’s Dan Murphy at the World Economic Forum in Davos.
“(Inflation)…in the first half of the year, partly because of taxes, and partly because we’re seeing it move faster than supply constraints whenever the recovery comes.” There is the job market.
But while the bank expects costs to increase in the first half of the year, “in the second half, we hope (inflation) will come to balance, it will adjust itself,” said Yaron. “We are seeing one or two cuts in the half year as inflation is expected to come in on target.”
Ratings agencies Fitch and Moody’s weighed in on the latest developments in the ceasefire between Israel and Hamas on Tuesday. Moody’s said the agreement would reduce the negative effects on Israel’s economy and finances, while Fitch said a permanent ceasefire would ease Israel’s credit risks, even if its financial position remains less fragile than before the war.
“A permanent cessation of hostilities in Gaza reduces concerns over the negative outlook on Israel’s ‘A’ sovereign rating,” Fitch’s report read on Tuesday.
The Governor of the Central Bank He said he expects Israel to expect growth of 4% in 2025 and 4.5% in 2026, and 0.6% in 2024 – “as long as we don’t see the concerns that are far from reasserting themselves.” “
On January 18, 2025, hundreds of people gathered in Tel Aviv, Israel, demanding the immediate return of hostages after a cease-fire agreement came into effect.
Nir Khaider | Anadolu Getty Images
“I hope the ceasefire from October 7 (2023), that terrible day will be a turning point,” Yaron said. “All the problems that we’ve seen, people see it from both sides… If it’s going to have a lasting effect, you know, it’s going to have to pave the way for regional arrangements that facilitate recovery and, especially, sustainable security. It provides economic growth, which obviously helps the Israeli economy, but only the Israeli economy.” Not – I think it helps the region as a whole.
The ceasefire, negotiated by Qatari, Egyptian and US negotiators, is currently in its first phase and will last for 42 days, with Hamas releasing at least 33 Israeli captives taken on October 7, 2023. Currently, 1,700 Palestinians are imprisoned in Israel.
At this stage, intensified humanitarian aid will be distributed to all parts of the Gaza Strip, hospitals and health centers will be renovated, and critical fuel supplies will enter the region.
In the year Israel will spend 100 billion shekels ($28 billion) on military conflicts by 2024, according to the finance ministry. announced on TuesdayGovernment borrowing and lending increased significantly. The country’s debt-to-GDP ratio rose to 69 percent by the end of 2024 from 61.3 percent in 2023.
In September, Moody’s downgraded Israel’s credit rating by two notches from “A2” to “Baa1”, keeping its outlook at the time “negative”. The move comes amid an escalating conflict between Israel and the Lebanese militant group Hezbollah. The warring parties brokered a ceasefire in November.
