Moreover, because of Phillips curve flattening, the possibility of remaining labor market slack, the likely substantial response of the exchange rate and its depressing effect on inflation, the low neutral rate, and the fact that inflation expectations are well anchored to the upside, the response of inflation to unexpected strength in demand will likely be modest and gradual, requiring a correspondingly moderate policy response and implying relatively slight costs to the economy.
The exchange rate of the shekel against the dollar has weakened in the last few months, and is expected to help exports. The trends in the current account are changing: after growing accustomed to a surplus in the last few years, we now expect the current account to be more or less balanced next year.