Ahead of the market opening: CPI in focus - here is what to expect

The trading day opens with all eyes on the Consumer Price Index to be published today - the week's central local figure, which will dictate expectations for further interest rate cuts.

Forecasts are converging around a moderate increase of 0.2%-0.4% in the July index. The important point is that even such an increase will actually lower annual inflation from the current 1.6% to about 1.5% - thanks to a low comparison base from last year, as the July index last year was relatively high.

What does this mean? An index within the expected range will support the Bank of Israel's path of interest rate cuts and strengthen the chance of another cut by the end of the year. But it is important to remember the big picture: economists predict much higher indices in the coming months, especially in August (against the backdrop of rising fuel, flight, and rent prices), which could accelerate inflation back above 2% by the end of the year and slow the pace of interest rate cuts.

In other words, a moderate index today is a positive moment within a trend that is expected to reverse. An index higher than expected, on the other hand, could cool expectations for interest rate cuts as early as today.

A topic that has caused a stir deserves clarification, and with a sober look, it seems that the excitement around it has grown to dimensions much larger than what is actually happening on the ground. Bank Jerusalem, one of the relatively small banks in the system, was at the center of headlines after ambiguity regarding its connection to the case of the missing Israelis in Austria, as the missing person is a bank employee, which raised conspiracies and rumors that there is a connection between her occupation and the disappearance.

It is important to clarify: Bank Jerusalem is a relatively small player in the Israeli banking landscape, specializing mainly in mortgages and niche activities, and it is not in the league of the five major banks. Even if there is a point here that requires correction or clarification, the impact on the broad investor or the stability of the financial system is very limited.

Sometimes the market and the media amplify specific stories to dimensions larger than reality, and it seems this is one of those cases. It is worth following, but without panic - until further details are clarified, there is no reason to draw broad conclusions.

The stock exchange closed in the green against the backdrop of continued earnings reports. TA-35 rose 0.3% and TA-125 added 0.5%. Notable after the reports: Tadiran jumped 10%, BrainsWay rose 6.5%, and Hyper Global jumped 12.7%. Nofar Energy continued to star with a rise of 7.5%, and the shares of the Tel Aviv Stock Exchange itself jumped 8.1% against the backdrop of the continuation of its share buyback program.

In New York, the S&P 500 set a new record after another inflation figure that calmed the market. The Nasdaq rose 0.8% and the Dow 0.1%. The US Producer Price Index (PPI), published yesterday, rose less than expected - following the moderate Consumer Price Index from the day before.

Both figures together reduced the fear of an interest rate hike in September, although they did not eliminate it entirely - some analysts, including at Bank of America, still predict hikes by the end of the year. Oil prices fell as Donald Trump moves from military pressure to economic pressure on Iran. On the earnings side, Cisco and Cerebras disappointed and fell.

The opening today is expected to be supported by the record on Wall Street and the positive atmosphere around moderating inflation. But the real focus will be on the local price index this afternoon.

For mortgage holders, today's index directly affects the pocket: a moderate index moderates the loan linkage and supports further interest rate cuts, while a high index will do the opposite. But as we explained, it is worth looking beyond the single figure - the forecast for the coming months is more worrying, and it is what will truly determine the pace of interest rate cuts.

Those planning a mortgage refinancing or another financial step might do well to take the full picture into account, not just today's headline.