The Ministry of Finance expects that tomorrow's publication of the Consumer Price Index for (CPI) June will show a rise of 0.5%. Banks and economic forecasters put the range of price increases in June at 0.4-0.7%. The difference in forecasts derives from different assessments as to the effect of the shekel deprecation on the housing item of the index.
The June CPI will be the third positive one in succession. The CPI was up 0.9% in May and 0.5% in April. The second quarter posted a 2% price hike, following a decrease of 1.3% in prices in Q1. The Q2 index rise is explained primarily by seasonal increases in the prices of clothing and footwear, and of fruits and vegetables, as summer products entered into the index.
In January-May, prices rose by 0.1%. Inflation for the first half year will, according to assessments, reach only 0.6%. Inflation for the whole of 2000 will amount to 2.5-3%, less than the official government target of 3-4%.
In August, the Bank of Israel is expected to leave the interest rate unchanged for the third month in succession. There are several reasons for this, foremost among them being the uncertainty surrounding the government's economic policy on inflation and the deficit for the next few years. The Bank of Israel may, however, resume the interest rate reduction process, if inflation expectations continue to decline, while financial markets continue stable.
Published by Israel's Business Arena on 13 July 2000