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Poll: Bank of Israel seen holding rates but some analysts call for a cut

The Bank of Israel is expected to leave short-term interest rates unchanged this week, its 13th such decision in a row, though some analysts believe it should cut rates to halt the shekel that stands at a 26-year high versus the dollar.

All 16 economists polled by Reuters believe the central bank’s monetary policy committee (MPC) will keep the benchmark rate at an all-time low of 0.1 percent when the decision is announced on Monday at 4 p.m. (1400 GMT).

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Before the last meeting on Oct. 7, analysts had widely believed the next change would be a hike as early as 2022 on the heels of rising inflation and a rapid economic rebound amid a widespread COVID-19 vaccine roll-out. One MPC members voted to raise rates to 0.25 percent at that meeting.

Since then, the shekel has gained as much as 7 percent versus the dollar to late 1995 levels and is the top performing emerging currency since the pandemic began, while inflation in October and third-quarter GDP growth were lower than expected.

Analysts said a key focus on Monday’s meeting would be how to deal with the shekel since the bank’s plan to buy $30 billion of foreign currency ended in late October, although there has been some intervention since.

Despite anger from exporters, policymakers have appeared to let the shekel strengthen since it lowers import prices and helps to contain inflation.

“There are many reasons for the bank to reduce interest rates, in light of the surge in the shekel, the moderation of inflation, the fear of the renewal of the corona virus and more. But it is likely to leave it unchanged mainly because of other central banks” starting to raise rates, Amir Kahanovich, chief economist for the Excellence Investment House, said.

Israel’s inflation rate eased to 2.3 percent in October from an eight-year high of 2.5 percent in September to remain within the government’s 1-3 percent annual target.

Based on bond yields, the rate is expected to hit 2.8 percent in the next 12 months, although economists on average predict 1.8 percent.

The economy grew an annualized 2.4 percent in the third quarter over the prior three months, well below expectations of 6 percent. Both the government and central bank forecast 7 percent growth in 2021.

This week’s meeting is the first for former US Federal Reserve senior economist Naomi Feldman, who has succeeded Reuben Gronau.

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Credit Suisse managers could face disciplinary action, Swiss regulator says

Swiss financial regulator FINMA said it was considering whether to take disciplinary action against Credit Suisse managers after Switzerland’s second largest bank had to be rescued last week by UBS.
FINMA President Marlene Amstad told Swiss newspaper NZZ am Sonntag it was “still open” whether new proceedings would be started, but the regulator’s main focus was on “the transitional phase of integration” and “preserving financial stability.”

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UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.26 billion) in stock a week ago and to assume up to 5 billion francs in losses in a merger engineered by Swiss authorities during a period of market turmoil in global banking.
Credit Suisse on Sunday declined to comment on the FINMA President’s comments when asked by Reuters for a response.
Asked whether FINMA is looking into holding current Credit Suisse managers accountable for the collapse of Switzerland’s second-largest bank, Amstad said it is “exploring the options”.
“CS had a cultural problem that translated into a lack of responsi-bilities,” Amstad was quoted as saying by NZZ, adding: “Numerous mistakes were made over several years”.
FINMA had conducted six public “enforcement proceedings” against Credit Suisse in recent years, Amstad said.
“We have intervened and used our strongest instruments,” she said of its previous moves.
Amstad also defended Switzerland’s decision to write down 16 billion Swiss francs of Credit Suisse Additional Tier 1 (AT1) debt, to zero as part of the forced rescue merger.
“The AT1 instruments contractually provide that they will be fully written off in the event of a trigger event, in particular the granting of extraordinary government support,” Amstad said.
“The bonds were created precisely for such situations.”

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Aramco affirms support for China’s energy security

Saudi Arabian oil giant Aramco affirmed on Sunday its support for China’s long-term energy security and development, the company’s CEO Amin Nasser said in remarks made before a forum in Beijing.

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Nasser said that the company has partnerships and emission-reducing technologies with China to make lower carbon products.

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Kuwait Oil Co dealing with ‘limited fire’ at well where oil leak occurred last week

Kuwait Oil Company said on Sunday it is dealing with a “limited fire” that erupted at a well where oil leaked last week.
The company said in a statement that no injuries had been reported at the scene.
“The company’s operations in the area have not been affected,” the statement read.
Kuwait Oil Company declared a state of emergency last Monday due to an oil leak in the west of the country.


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