Israel’s Central Bureau of Statistics will publish the Consumer Price Index (CPI) reading for September on Friday afternoon. The rate of inflation has been moderating in Israel after the August CPI reading fell by 0.3%, bringing down annual inflation from 5.2% to 4.6%. For September, analysts predict that the CPI will be unchanged or rose by 0.1%.
Bank Hapoalim financial markets chef strategist Modi Shafrir explains that air fares fell sharply in dollar terms in September and this will bring down the CPI, although this fall is offset somewhat by the weakening of the shekel against the dollar and the euro. Prices of vacations in Israel, which soared in July and August, fell by about 7% in September, Shafrir estimates.
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Shafrir adds, “Fuel prices are expected to have fallen by 3.2%, which will cut the CPI by 0.1% due to the fall in oil prices in September.” Shafrir also says that clothing and footwear prices fell moderately last month due to end of season sales. On food, Shafrir estimates a slight decline in prices last month due to special offers ahead of the holidays. “But they will probably rise sharply in the October CPI.”
Leader Capital Markets chief economist Yonatan Katz, on the other hand, predicts that there was a slight seasonal rise in the prices of agricultural produce last month.
Mizrahi-Tefahot Bank market economist Yonie Fanning also believes that the holidays also moderated food prices in September. He predicts that the September CPI was unchanged, with annual inflation falling very slightly to 4.4%. Fanning mentions that the fall in commodity prices and the fall in fuel prices as well as in global shipping prices would have left their mark. “There is a big question mark about car prices. If stability in these will be recorded, this would be significant news in inflationary developments,” he comments.
How will the Bank of Israel react to the inflation data?
However, housing prices are expected to continue rising. Bank Hapoalim believes that rental prices will contribute a rise of 0.1% to the September CPI, and Leader Capital Markets also forecasts a continued acceleration of rental prices, with the housing CPI rising 0.6% this month. Shafrir predicts that car prices will rise by 0.7%.
Regarding the impact of all this on the Bank of Israel Monetary Committee’s upcoming interest rate decision on November 21, Meitav Dash investment house chief economist Alex Zabezhinsky says, “The Bank of Israel is expected to significantly moderate the pace of its rate hikes. It’s likely that in the current situation there will be a hike of 0.25%-0.5% at the next meeting.”
Published by Globes, Israel business news – en.globes.co.il – on October 13, 2022.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.
