US Inflation Exceeds Expectations, Israel Forecasts Decline
Translated & summarized from Maariv by baba
US inflation hit 3.7% annually in September, exceeding expectations with a 0.6% monthly rise. Analyst Ariel Feiglin suggests this could reverse, leading to a drop towards the 2% target. Meanwhile, Israel's inflation is forecast to fall by 0.3% monthly, with an annual rate of 1.8%, influenced by seasonal factors and government policy. Despite this, the interest rate gap with the US may prevent the Bank of Israel from lowering rates.
The story in 5 lines · by baba
- US inflation reached 3.7% annually in September, with a 0.6% monthly price index increase.
- Analyst Ariel Feiglin predicts a potential rapid drop in US inflation towards the 2% target.
- High energy prices are impacting consumer goods and airfare, according to Feiglin.
- Israel's inflation is forecast to decrease by 0.3% monthly, with an annual rate of 1.8%.
- The interest rate gap with the US may prevent the Bank of Israel from lowering rates.
Inflation in the United States reached 3.7% annually in September, with a 0.6% monthly increase in the price index. According to analyst Ariel Feiglin, nearly three percent of the price increase accumulated over the past seven months, suggesting that continued rises in the next five months could lead to problematic annual inflation levels. However, Feiglin also noted that this trend could reverse, potentially leading to a rapid decrease towards the Federal Reserve's 2% target as these seven months fall out of the annual calculation. He believes this drop is possible even if oil prices remain around $100 per barrel and diesel prices stay above $6 per gallon.
The impact of energy prices extends beyond direct fuel costs, with high diesel prices affecting consumer goods and jet fuel prices contributing to increased airfare. The transportation sector saw a 0.6% rise in September. Feiglin highlighted that the 0.3% monthly increase in the core index is not historically unusual.
In contrast, Mizrahi Tefahot's forecast for Israel predicts a 0.3% decrease in the upcoming index. Feiglin attributes the difference between the US and Israel to factors such as a seasonal drop in airfare prices, which has a more significant effect in Israel, the timing of fuel price changes, and government policy, including a planned reduction in the purchase tax expected to lower the local index by about 0.15 percentage points.
Despite the expected monthly decrease in Israel, Feiglin estimates the annual inflation rate will rise to approximately 1.8%. While this rate might typically allow the Bank of Israel to lower interest rates, Feiglin stated that the interest rate differential with the US is already impacting the foreign exchange market. Consequently, interbank market pricing reflects little expectation of an interest rate cut and even a small chance of a slight increase.
Mentioned
