The Consumer Price Index (CPI) fell 0.2% in 2014, after remaining unchanged in December, the Central Bureau of Statistics reported this evening. This was the first time that Israel had deflation since 2006. Deflation of 0.2% is well below the government's inflation target range of between 1% and 3%.
Prominent price decreases included fruits and vegetables (8.8%), gasoline (2.2%), and hosting, vacation, and excursions (6.5%).
The most prominent price increases were in housing (0.1%), taxis (0.8%), footwear (4%), overseas and inland travel (1.7%), and clothing (6.9%).
Macroeconomists predicted that prices would drop 0.1% in December. The Impact investment house said that the change in the CPI for the year would be zero or even below it, and the CPI would fall significantly in January and February by a cumulative 1%, following price cuts for water, electricity, and gasoline. Energy prices are projected to fall even further with the continued plunge in global oil prices in the short term.
"This figure is already reflected in the market, and depends on continuation of the trend in oil prices. Since the bond market already reflects a fall in the CPI in January and February, it appears that index-linked instruments will return to popularity, in preference to shekel instruments. The main interest rates are at bottom, and are projected to begin rising again in both Israel and the US (first in the US) by the end of 2015," the investment house wrote.
Published by Globes [online], Israel business news - www.globes-online.com - on January 15, 2015
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