Inflation Rate Eases in Israel

By Steven Scheer
JERUSALEM (Reuters) – Israel's inflation rate eased in September for the first time in seven months, according to data from the Central Bureau of Statistics released on Tuesday, but it is unlikely to convince policymakers to reduce interest rates anytime soon.

The annual inflation rate fell to 3.5% last month, down from a 10-month high of 3.6% in August. This figure is slightly below the 3.7% expected in a Reuters poll but still well above the government's annual target range of 1%-3%.

Government officials attribute the rise in inflation, which was at 2.5% in February, largely to supply issues related to the ongoing war.

In September, the consumer price index dropped 0.2% from August, driven by lower transportation costs, such as airfares and fuel, as well as reductions in entertainment, clothing and footwear, and fresh fruit prices. However, these declines were partially countered by increases in fresh vegetable prices, education, and furniture.

This report comes just hours after it was announced that the economy grew only 0.3% annualized in the second quarter, a revision from a previous estimate of 0.7%, as the conflict with Hamas continues to impact growth.

On a per capita basis, the economy contracted 0.8% in the April-June quarter. The central bank revised its economic growth estimate for 2024 down to 0.5% from 1.5%.

Following a benchmark interest rate cut in January, the Bank of Israel has maintained the rate at subsequent meetings amid geopolitical tensions, rising price pressures, and looser fiscal policies due to the ongoing conflict.

The next interest rate decision will be made on November 25. Israeli central bankers have warned that rate hikes may follow if inflation remains elevated.

Mizrahi Tefahot chief strategist Yonie Fanning remarked, "Today's (inflation) figure is far from one that would justify an interest rate hike in November."