A "Bloomberg" survey shows that the average capital market analysts' forecast is for a 0.3% drop in the Consumer Price Index (CPI) for January 2010. The median forecast is a drop of 0.4%. The Central Bureau of Statistics will publish the CPI tomorrow evening.
Excellence Nessuah chief economist Shlomo Maoz predicts the sharpest drop, at 0.6%.
The expected drop in the CPI in January comes after the CPI was unexpectedly unchanged in December 2009; the analysts' consensus was for a rise of 0.3%.
Inflation in 2009 reached 3.9%, above the government's 1-3% price stability target. The capital market derived 12-month inflation forecast is currently 2.7%.
If the CPI actually falls by 0.3% in January, this will be first drop since the 0.3% drop in September 2009. The Bank of Israel's guiding assumption is that the CPI will be low in the coming months, reflecting the easing of inflationary pressures. Capital market sources increasingly predict that the Bank of Israel will slow its pace of interest rate hikes, following the three hikes since last August to the current rate of 1.25%. The capital market consensus is that the interest rate will reach 3% by the end of the year.
Maoz told "Globes", "The drop in the price of water and in the seasonal drop in the clothing and footwear item will pull the January CPI down." After the 0.8% drop in the housing item pulled down the December CPI, Maoz believes that this trend will continue. "Housing prices will fall at least through Passover. The Bank of Israel will keep the interest rate unchanged both this month and in the coming months. There is no reason to raise the interest rate."
Published by Globes [online], Israel business news - www.globes-online.com - on February 14, 2010
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