The dollar is stable, above 3.04 shekels; "Fed rate hike forecasts are exaggerated"

There is calm in the foreign exchange markets, both global and local: the dollar is trading above 3.04 shekels, and the euro is above 3.50 shekels. In global markets, the dollar index against a basket of major currencies is rising by 0.1%, to 100.0 points. The euro is stable at around 1.15 dollars, and the pound is holding above 1.34 dollars. In Japan, the dollar is rising by 0.3%, to 157.6 yen.

Alex Zabezhinsky, chief economist at Meitav, does not share the forecasts that the Fed is expected to raise interest rates at its next meeting on December 16.

"Market forecasts for a Fed rate hike are exaggerated. Futures imply a probability of about 70% for a rate hike in September — in our assessment, the chance of this is lower, not only because of the expected weakness in the labor market and private consumption, but also because inflation, although still high, is likely in a weakening trend," says Zabezhinsky.

He adds: "Contrary to the discourse around inflation, it is no more worrying than it was at the beginning of the year. The annual core PCE inflation rate, calculated based on the last three months, fell from 4.8% in February to 2.9% in June, and returned to levels that characterized the second half of 2025. Despite strong private consumption in the second quarter, excluding energy prices, inflation components remained stable and even moderated in recent months. Inflation expectations also do not cause concern, as they have remained stable and at a relatively moderate level."

At Bank of America, they believe that the Fed's decision at its last meeting to leave the interest rate unchanged, along with the press conference of Chairman Kevin Warsh, "increased uncertainty in the markets and damaged the credibility of the central bank." According to them, the market reaction — a rise in inflation expectations, a weakening of the dollar, and declines in stocks — is characteristic of situations where investors doubt the bank's commitment to price stability.

"If particularly weak inflation data are not published in the coming weeks, a rate hike as early as September may be necessary to restore market confidence," the bank said.