US interest rate hike

After approximately 7 consecutive years of interest rate cuts in the United States, last week the interest rate increased for the first time. In doing so, the Governor of the US Federal Reserve is signaling that, as far as she is concerned, the subprime crisis that began in late 2008 and early 2009 is over.

How does all of this affect your mortgage? Unlike many of my friends who suggest rushing and prepaying, taking out mortgages quickly, etc. because interest rates are about to rise, I want to reassure you. Let's look at the impact of the American interest rate hike on the Israeli economy:

1. US interest rates are rising, and international investors prefer to invest there rather than in Israel. Therefore, they are converting shekels to dollars, causing the shekel to devalue, meaning each dollar is worth more shekels.

Exporters who receive their income in dollars and have expenses in shekels are profiting.

3. Exports are increasing -> Economic growth is increasing

Optin Architect

Up to this point, it is a positive process that will only occur if interest rates in Israel remain low despite the interest rate hike in the US. This welcome growth process will be "stuck" if interest rates in Israel also rise, and the Israeli governor has already stated that in her opinion, the dollar exchange rate is too high and a devaluation would be good for the economy. I assume the recent negative index indicating an economic slowdown will encourage keeping interest rates low in Israel. In the longer term, continued devaluation of the shekel will cause inflation to rise, as the Israeli market is full of imported products. A slight increase in inflation is positive and indicates growth. Only in a third stage, if inflation rises too much (3 times its current level), will the Israeli governor have a reason to start raising interest rates. Raising interest rates will cause households to pay more for credit (mortgages, bank overdrafts, etc.), disposable income will decrease, people will buy less, there will be a recession, and so on. If you've read this far, a word of caution. Whenever you read an economic commentator/forecast, including that of the undersigned, remember that economics belongs to the social sciences, not the exact sciences, and every forecast should be taken with a degree of skepticism.