Economists Predict Drop in Israeli Inflation Data
Translated & summarized from Globes by baba
Economists predict Israel's September Consumer Price Index will fall by 0.3%-0.4%, leading to a slight annual inflation increase to 1.7%-1.8%, still within the Bank of Israel's target. The drop is mainly due to cheaper international flights and temporary fuel tax cuts, though fuel prices may rise after elections. The Bank of Israel is expected to hold its interest rate steady at 3.25% on October 21st, with differing forecasts on future rate movements.
The story in 5 lines · by baba
- Economists forecast a 0.3%-0.4% decrease in Israel's September Consumer Price Index.
- Annual inflation is expected to rise to 1.7%-1.8%, remaining within the Bank of Israel's target.
- Cheaper international flights and temporary fuel tax cuts are driving the predicted index decrease.
- Fuel prices may increase in November if temporary tax reductions are not extended post-election.
- The Bank of Israel is expected to maintain its interest rate at 3.25% on October 21st.
Economists anticipate that the Consumer Price Index for September 2026, due for release on Thursday, October 15th, will decrease by 0.3% to 0.4%. This follows a 0.7% rise in August, largely attributed to increased fuel and international flight costs. If these forecasts hold true, the annual inflation rate is expected to climb from 1.5% last month to between 1.7% and 1.8%, yet remain within the Bank of Israel's price stability target of 1% to 3%.
Bank Hapoalim forecasts that the transportation and communication sector will decline by approximately 2.5% in September, shaving about 0.46% off the CPI. The primary driver for this decrease is cheaper international flights, with prices projected to fall by around 12% in dollar terms. Meanwhile, fuel prices could surge post-election.
An additional factor contributing to the expected index drop is the September reduction of 50 agorot per liter in fuel excise tax, implemented by Finance Minister Bezalel Smotrich, which lowered gasoline prices to 7.75 shekels per liter. A further 50 agorot reduction was approved in early October, preventing a fuel price hike. However, both reductions are temporary and set to expire at the end of October, shortly after the Knesset elections. Should the government not extend them, fuel prices might rise again in November, exerting upward pressure on the CPI, depending on oil prices and exchange rates.
Despite the anticipated index decrease, not all prices are expected to fall. Bank Hapoalim predicts a rise of about 2.8% in fruit and vegetable prices, and a 0.2% increase in housing costs. Concurrently, Alex Zevziner, chief economist at Meitav Investment House, notes signs of moderating service consumption and labor demand, suggesting a broader weakening of price pressures beyond immediate flight and fuel impacts.
The inflation data release precedes the Bank of Israel's interest rate decision on October 21st. Following a September rate cut to 3.25%, market expectations are for the central bank to maintain the current rate. Yoni Fanning, chief strategist at Mizrahi Tefahot Bank's trading room, points to interest rate differentials with the U.S. as a limiting factor for further near-term cuts. Leader Capital Markets also anticipates the rate remaining at 3.25%, citing continued private consumption growth as reducing the urgency for a cut. In contrast, Meitav projects a potential rate decrease to 2.75%-3% within a year, differing from Leader's forecast of 3.25%. This divergence highlights the key question of whether the upcoming index reflects a sustained inflation slowdown, enabling future rate cuts by the Bank of Israel.
Mentioned
The same event, reported separately by each outlet. Open a few to compare what different newsrooms emphasize — and what they leave out.
Other 2
