Israel's Inflation Surge in August

JERUSALEM (Reuters) – Israel's inflation rate surged in August to its highest rate in nearly a year, as reported by the Central Bureau of Statistics on Sunday, reducing the likelihood of more interest rate cuts anytime soon.

The annual inflation rate rose to 3.6% last month from 3.2% in July, marking the highest level since last October. This figure surpassed expectations of 3.2% in a Reuters poll and exceeds the government's target range of 1-3%.

Government officials have largely attributed the spike in inflation to war-related supply issues.

The consumer price index increased by a higher-than-expected 0.9% in August compared to July, driven by rising costs of fresh produce, food, housing, transport, education, and entertainment. These increases were only partially mitigated by declines in clothing, footwear, telecoms, and furniture.

After reducing its benchmark interest rate in January, the Bank of Israel has maintained the rate during subsequent meetings in February, April, May, July, and August. The bank cited geopolitical tensions, rising price pressures, and looser fiscal policy due to ongoing conflict with the Palestinian militant group Hamas.

The next decision on interest rates is scheduled for October 9. Israeli central bankers indicated they do not expect cuts until 2025.