After reaching a fifteen-month peak yesterday, the shekel has weakened against the basket of currencies this morning following the release of the Consumer Price Index reading for June by the Central Bureau of Statistics late yesterday, showing a 0.6% drop. This means that inflation in Israel in the twelve months to the end of June was below 1%, and outside the government's 1-3% target range.
The shekel-dollar rate is currently up 0.11% in comparison with yesterday's representative rate, at NIS 3.5427/$. Against the euro, the rate is unchanged, at NIS 3.9904/€.
"The drop in the CPI in June was a big surprise, because at most it was thought that it might fall by a third of that amount," writes Mizrahi Tefahot Bank (TASE:MZTF) chief analyst Ronen Menahem. "Moreover, six index items fell (as opposed to just one the previous month), indicating a broad fall in prices, and that not just a single item is the cause. The seasonally adjusted index also fell, by 0.5%, which reinforces the point.
"It's important to note that in the twelve months to the end of June, the CPI rose just 0.8%, meaning that the rate of inflation is again below the lower limit of the target range - for the first time after five months, and after a rising trend in the previous few months.
"We now have to wait for the GDP growth figures for the second quarter of the year and for the July CPI reading, which assumes even greater importance for the next interest rate announcement by the Bank of Israel. This decision will be announced on August 28. According to the Bank of Israel Research Department, the interest rate will rise on that date. In our view, certainly following the June CPI reading, it is more likely that it will remain unchanged."
Published by Globes, Israel business news - en.globes.co.il - on July 16, 2019
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