Economists expect the Central Bureau of Statistics to announce tomorrow that the Consumer Price Index (CPI) reading for March rose 0.7%, meaning that the rate of inflation for the past 12 months has risen to 4%, exceeding the top limit of the Bank of Israel's annual inflation target range of 1%-3% for the third consecutive month.
In response to rising inflation, the Bank of Israel Monetary Committee raised the interest rate earlier this week from 0.1% to 0.35%. In the announcement, Bank of Israel Governor stressed that while inflation was essentially from imported items, it had also influenced almost every other economic sector. He said that he expected the interest rate to rise to 1.5% within a year.
Due to the sharp rise in commodity prices following the Russian invasion of Ukraine, the Bank of Israel revised its inflation forecast for 2022 sharply upwards from 2% to 3.6%. The Bank of Israel sees 2% inflation in 2023.
Israel's rapidly narrowing fiscal deficit, which shrank to just 1.4% of GDP in the 12 months to the end of March, from 2.2% at the end of February, due to high revenues, provides the government with the opportunity to initiate plans to lower the cost of living.
Published by Globes, Israel business news - en.globes.co.il - on April 14, 2022.
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