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BoI unlikely to change its existing base rate

The central bank of Israel is expected to retain its base rate at 0.10% on its rate decision scheduled next week.

The recent Fed rate hike caused the ILS to depreciate, and inflation rate is below the target at -0.9% year on year in November. At the same time, growth outlook of the economy seems weaker due to fall in exports. Therefore, the central bank is unlikely to take any risk of rate hike.

"While BoI has a dovish bias, we do not think it has the intention to move into negative rates at the moment. Meanwhile, BoI maintains its bias for a weaker ILS and we expect this to materialize when the interest rate differential widens in favour of US and USD strength resumes. We are long USDILS (target: 4.10, stop: 3.65, trade initiated on 25 June 2015)", says Barclays in a research note to its client.

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