Israel's Inflation Update

By Steven Scheer

JERUSALEM (Reuters) – Israel's inflation dipped in November. According to data from the Central Bureau of Statistics, the inflation rate fell to 3.4% last month, its lowest since July, down from 3.5% in October. This rate had reached a 10-month high of 3.6% in August and is below the expected 3.6% from a Reuters poll; however, it still exceeds the government's 1%-3% target range.

Government officials attribute the inflation spike over the past year to war-related supply issues, despite easing price pressures globally. The consumer price index decreased by 0.4% in November compared to October, primarily due to lower costs of fresh produce, transportation, shoes, as well as education and entertainment. These reductions were partially offset by rising prices in housing, food, and clothing.

The Bank of Israel, after cutting its benchmark interest rate in January, has maintained that rate during subsequent meetings through February, April, May, July, August, October, and November. The bank cites geopolitical tensions, increasing price pressures, and a more lenient fiscal policy due to the conflict with Hamas as reasons for keeping rates unchanged.

The next interest rate decision is on January 6. Central bankers have indicated potential rate hikes if inflation remains elevated, with expected price increases for various goods, including water and electricity, as well as some taxes in 2025.

Mizrahi Tefahot Bank chief strategist Yonie Fanning commented, "Today's data alone reflects a different trajectory than we have been accustomed to in recent months. Even if we probably won't get a local interest rate cut in January, we certainly expect a change in rhetoric in the interest rate announcement (to less hawkish)."