Israel’s Consumer Price Index (CPI) remained unchanged in January. In the twelve months to the end of January, the inflation rate fell to 2.6%, compared to 3% in 2023. The decline is in line with analysts’ expectations that the annual inflation rate would fall to 2.6- 2.7% in January.
Clothing and footwear and entertainment and culture both fell 1.0% last month. The prices of fresh products fell by 0.5% and transport by 0.4%.
The Central Bureau of Statistics also published the change in house prices (which are not part of the general CPI) between October-November 2023 and November-December 2023. On average, prices increased by 0.7%. . In the breakdown by region, prices fell by 1.3% in Jerusalem, and increased by 1.2% in Haifa, by 1.6% in the center and by 0.8% in the south. In Tel Aviv, prices remained stable.
New housing prices increased by an average of 0.9%.
In the comparison between November-December 2023 and November-December 2022, the house price index fell by 1.4%. Prices fell 4.4% in Tel Aviv, 1.3% in Jerusalem, 0.8% in the central region and 0.1% in the south. Prices increased by 3.3% in the northern region and by 0.3% in Haifa.
The new housing price index fell 2.7%.
Phoenix Holdings Chief Economist Matan Shitrit explains the impact of falling inflation in Israel on the Bank of Israel’s interest rate policy: « Analysts’ forecasts took into account a trend continues the decline in the annual inflation rate, but despite the decline, the chances of an interest rate cut in the next decision remain low. In our opinion, the process of reducing interest rates will be cautious and slow, and the Bank of Israel will follow the measures of the US Federal Reserve and the European Central Bank, where expectations The beginning of a decline process rates is more and more distant. The Bank of Israel’s research department’s forecast for the bank’s interest rate at the end of 2024, between 3.75 and 4.00 percent, also indicates a very gradual process.
« Regarding the impact of Israel’s sovereign rating on interest rates, it is clear that the rating downgrade was priced in by the markets, which remained stable, while the shekel strengthened. strengthened, giving the green light for further interest rate cuts. Nevertheless, while recent CPI figures have been affected by a sharp drop in demand, current data points to a fairly strong recovery in l economic activity, which means that the deflationary factor could dissipate. Moreover, inflation forecasts for the next twelve months, which already pointed to the rigidity of inflation, will now begin to take into account the rise in VAT expected in January 2025. We estimate that the VAT hike will contribute 0.5 percentage points to the CPI – 0.2 percentage points in January 2025 and the remainder in the following months. »
Published by Globes, Israel Business News – fr.globes.co.il – February 15, 2024.
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