Interest rate cuts in Israel will be delayed: The worrying forecast revealed until 2027

The Psagot investment house conducted a weekly macroeconomic review in which it addressed, among other things, the surprise in the US labor market, the chance of a Fed interest rate hike, the labor market and average wage in Israel, and the chance of an interest rate cut by the Bank of Israel in the upcoming decision.

"The US employment report showed a significant and surprising cooling in the labor market. The pace of job creation is only enough to keep up with population growth, but no more. The decline in the unemployment rate is mainly due to workers leaving the labor force. The reason for the decline in the labor force is not yet clear but may affect the growth capacity of the US economy in the future.

The probability of an interest rate hike in September in the US has dropped to a level of only 44.4%, but due to the Fed's ambiguity, any data could lead to dramatic changes.

Business activity in Israel continues to expand but at a slow pace. All sectors recorded an improvement in the business activity balance, except for the services sector. The annual growth rate of the average wage in Israel jumped to 6.6%, while the average wage in the high-tech sector rose by 13.7%.

The rapid growth rate in wages continues to strengthen inflationary pressures. Combined with the tight labor market and the wait for elections, the continuation of interest rate cuts in Israel may extend into 2027."