JERUSALEM, May 6 (Reuters) - A strengthening shekel has become a concern for the Bank of Israel and could help to delay further interest rate increases, a voting member of the central bank’s monetary policy committee said on Monday.
Andrew Abir, head of market operations at the Bank of Israel, said the exchange rate was another challenge that would affect future monetary policy in addition to weakening global growth and trade that have helped to lower expectations for tightening in the United States and Europe.
“The depreciation of the shekel in 2018 has been partly reversed, and if the appreciation continues, as the monetary committee has emphasised, it may delay the increase of inflation toward the midpoint of the target range,” he told a conference.
The shekel has appreciated some 4 percent so far this year versus the dollar after an 8 percent depreciation in 2018. Against a basket of currencies of Israel’s main trading partners, the shekel stands near a six-month high.
After a surprise rate increase in November, policymakers have held the benchmark lending rate at 0.25 percent at the subsequent three meetings.
The central bank has said future hikes would be gradual and cautious and depended on inflation moving near the midpoint of the target - or around 2 percent. The rate stood at 1.4 percent in March. The next decision is May 20 but an increase is not widely expected until later in 2019.
The bank’s own economists project a quarter-point increase towards the end of the third quarter. (Reporting by Steven Scheer; Editing by Alison Williams)