Prospects for US-Iran Agreement Improve, Bank of Israel Expected to Resume Rate Cuts

BlockBeats News, May 25th - As the United States appears to be moving closer to a peace agreement with Iran, the Bank of Israel is expected to cut interest rates. According to a survey of 14 economists, 8 of them predict that the Bank of Israel will cut the benchmark interest rate by 25 basis points to 3.75% on Monday.

Rafael Gozlan, Chief Economist of IBI Investment Company, stated: "From the central bank's perspective, with inflation stable near the midpoint of the target range (1.9%), and the Shekel appreciating significantly, all support a slight rate cut. The next decision will depend on geopolitical developments. If the situation does not see a major escalation, we expect a rate cut; if the situation deteriorates, rates may remain unchanged."

The Israeli Shekel closed at 1 USD to 2.9 Shekels last Friday, maintaining its strongest level in over thirty years, further solidifying market expectations of mild future inflation. According to a survey released by the Bank of Israel on May 19th, the average inflation expectation for the next 12 months in Israel has dropped from the previous 2.3% to 1.8%. Since the Monetary Policy Committee's last rate decision at the end of March, the Shekel has risen by 8%, with a cumulative appreciation of nearly 24% over the past year. Other factors supporting the rate cut include the slow recovery of the Israeli economy from the war with Iran, with even with an eventual agreement, economic growth is not expected to accelerate significantly.