Israel’s Inflation Rate Surges

JERUSALEM (Reuters) – Israel’s inflation rate surged in August to its highest rate in nearly a year, according to data from the Central Bureau of Statistics released 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 its highest level since last October. This figure significantly exceeds expectations of 3.2% in a Reuters poll and far surpasses the government’s 1-3% annual target range.

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

The consumer price index (CPI) 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 offset by declines in clothing and footwear, telecommunications, and furniture.

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

The next meeting to decide on rates is scheduled for October 9. Israeli central bankers have indicated that they do not anticipate rate cuts until 2025.