Written by: Aaron Katsman | August 12, 2008
Of late, the Bank of Israel has maintained that due to slowing global growth, they believe that inflation will be kept in check. Many market participants have accepted that view. Now along comes the Economist Intelligence Unit (EIU), and challenges that assumption.
According to a report in Globes, ” ..But the EIU believes inflation in Israel will remain high, and says that “the Bank of Israel’s monetary policy will continue to be contractionary.”
While to many this may seem to be an argument of little importance, it actually may potentially determine the direction of both local interest rates and where the shekel trades in both the near and mid-term.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
Written by: Aaron Katsman | June 16, 2008
Aaron Katsman
IsraelNewsletter.com
Israel’s CPI reading for May came in with a rise of 0.7%. This is the highest CPI for May in 7 years. While the number came in at the high end of estimates, it wasn’t much of a surprise. We have been speaking about surging inflation for about a year. I would expect the June CPI number top be strong as well, due to a strengthening US dollar. The USD has a very strong weighting in the index, and in fact over the last year, it has skewed the CPI number down, because the USD has been so weak. Now that it has started to move higher against the Shekel, something that started in June, I would look for continued higher CPI numbers looking ahead.
I look for the Bank of Israel to potentially raise interest rates in order to try and curb the spike in inflation. With local interest rates now at 3.5% , I wouldn’t be surprised to see rates a full 1% higher by the beginning of the fall.
While this continued inflation is going to hurt local fixed rate Israeli bonds, look for Israeli hi-tech to actually benefit from this move (read our analysis).
Disclosure: Author’s fund has no position in any stock mentioned as of 6/16/08.
Please see our Disclaimer HERE.
NEW! Introducing Israel Opportunity Investor, our monthly subscription-only newsletter. Stay ahead of the game and make smart decisions in Israel stocks. Go here to learn more.
Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
