Israeli economist anticipates central bank intervention to regulate dollar exchange rate

Translation of SadaNews Economy - Uri Greenfield, chief strategist at the Israeli investment firm "Psagot", suggested that the Bank of Israel may intervene in the near future to try to regulate the exchange rate of the dollar against the shekel.

The dollar has fallen below 3 shekels for the first time since 1995.

In an interview with the Hebrew economic newspaper Calcalist, Greenfield believes that the Bank of Israel may soon return to a policy of lowering interest rates which was halted with the outbreak of war, aiming to keep foreign exchange rates within reasonable limits. The SadaNews Economy section also translated this.

He predicted that the dollar could return to around 3 shekels or slightly higher in the near future.

Regarding the Consumer Price Index increase in March by 0.4%, which is lower than the expectations of 0.5%, Greenfield stated that this increase does not exceed 0.1%, reflecting an annual rate of approximately 1.2%, which is extremely low, and it constitutes low inflation especially during wartime.

As for the budget deficit in March, he regarded it as a pleasant surprise, as it decreased from 4.7% in February to 4.2% over a month of war.

He said: Defense spending was high, while spending by other ministries was low. On the revenue side, instead of the sharp decline expected, the treasury recorded a one-time income from the sale of technology companies that are taxed on their profits.

He added: Looking at all the data, the inflation that exceeded expectations positively, and the strength of the shekel that helps curb prices, along with a deficit that is not concerning in the short term, and assuming that the war fully ends, the Bank of Israel may return to lowering interest rates as soon as the end of May, and this is not a radical step, but a gradual and measured return of 0.25% each time, taking into account inflation and the exchange rate.