Israel's Consumer Price Index (CPI) rose by 0.6% in April, the Central Bureau of Statistics reported today. Market expectations were for a rise of 0.5%.
There were notable price rises in fresh fruit and vegetables (7.8%), hospitality and vacations (5.5%), clothing and footwear (5.2%), culture and entertainment (1.5%), and transport (0.7%).
Notable declines were in furniture and home equipment (0.5%) and health (0.3%).
The index excluding housing rose by 0.9%, to 98.8 points. The index excluding energy rose by 0.7% to 100.2 points, and the index excluding fresh fruit and vegetables rose by 0.4%, to 99.3 points.
In January, the CPI fell sharply, by 0.9%, and it fell by a further 0.7% in February. These falls were attributed to reductions in electricity and water tariffs (by 10% each) and did not stem from weakness in demand in the economy and a slide into a recession, at least, that is what the Bank of Israel argued. Support for this view came in March, when the CPI rose by 0.3%.
Nevertheless, despite the positive inflation figures for the past two months, inflation over the past twelve months is negative, at -0.5%, which compares with a government inflation target of 1-3%. Excluding housing, the CPI fell 1.3% in the twelve months to the end of April.
Union Bank of Israel says, "The inflation environment for the coming year remains low, at 0.8%, below the bottom of the government's price stability range. The Bank of Israel's interest rate is at a low of 0.1%, but Treasury bond yields incorporate a chance of a further interest rate cut later on. The decline in the shekel-dollar exchange rate in the past few days is likely to support such a decision. The Bank of Israel's last interest rate cut, from 0.25% to 0.1%, almost entirely stemmed from the desire to support the shekel-dollar rate. However, we have seen that the effect was limited in time, so that it is not clear whether at such a low interest rate the Bank of Israel will continue to rely on this tool, which has pretty much exhausted its effectiveness, or whether it will choose other tools."
Published by Globes [online], Israel business news - www.globes-online.com - on May 15, 2015
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