07:13 AM EDT, 10/04/2024 (MT Newswires) -- The Bank of Israel (BoI) kept its policy rate at 4.50% in August, noted UBS.

In the bank's view, BoI is likely to leave this unchanged next

week and in the coming months.

Inflation surprised strongly to the upside in August at 3.6% year over year against Bloomberg consensus expectations of 3.2%, showing the impact of a supply-constrained economy, stated UBS.

Against unfavorable inflation dynamics, high public spending and escalating security risks, Israel's central bank is likely to remain focused on financial stability, according to UBS.

The bank thinks the BoI stands ready to contain disorderly shekel (ILS) weakness, similar to its actions after last Oct. 7.

With the Middle East conflict escalating, UBS recently lifted its end-of-quarter USDILS forecasts through Q3 2025 to 3.85, 3.80, 3.70, and 3.60 from 3.70, 3.60, 3.55 and 3.55, respectively.