September Inflation Index Expected to Drop Sharply, Easing Price Rises
Translated & summarized from Israel Hayom by baba
Israel's September Consumer Price Index is expected to drop significantly, signaling a continued slowdown in inflation, with economists predicting a 0.2% to 0.4% decrease. This decline is largely due to falling flight and fuel prices, though rising fruit, vegetable, and housing costs will offer some offset. Despite the easing inflation, the Bank of Israel is anticipated to keep interest rates steady at 3.25% for the next year due to robust private consumption and global economic factors. This means mortgage and loan holders are unlikely to see immediate relief from borrowing costs.
The story in 6 lines · by baba
- Israel's September Consumer Price Index is expected to fall significantly, indicating a continued slowdown in inflation.
- Economists forecast a 0.2% to 0.4% decrease in the September index, primarily driven by lower flight and fuel prices.
- Despite falling inflation, the Bank of Israel is expected to maintain the current interest rate of 3.25% for the next year.
- Rising fruit, vegetable, and housing prices are expected to partially offset the overall decrease in the index.
- Mortgage and loan holders are unlikely to see immediate relief as interest rates are predicted to remain stable.
- Business sector inflation expectations have reached their lowest point since January 2022.
The Consumer Price Index for September is anticipated to show a significant decrease, indicating a continued slowdown in inflation in Israel. Economists from Bank Hapoalim and Leader Capital Markets forecast a drop of 0.2% to 0.4% for the month. This decline is primarily driven by a projected 12% decrease in flight prices in dollar terms, coupled with a strengthening shekel, according to an strategist at Bank Hapoalim's trading room. The transportation and communication sector is expected to reduce the index by approximately 0.46 percentage points. Reductions in fuel excise tax and lower fuel prices are also contributing factors. However, anticipated increases in fruit and vegetable prices (around 2.8%) and housing costs (around 0.2%) are expected to partially offset the overall index decrease.
Despite the expected moderation in inflation, analysts predict that the Bank of Israel will maintain its current interest rate of 3.25% for the upcoming year. This is partly due to the continued recovery in private consumption, which has grown at a 5.4% annual rate in real terms from July to September. Global energy price increases, political uncertainty ahead of Israeli elections, and rising government bond yields are also factors influencing interest rate decisions. Consequently, while the September index may bring good news regarding price increases, it is unlikely to translate into immediate relief for mortgage and loan holders, who may face a prolonged wait for further interest rate cuts.
One forecast suggests that a 0.4% drop in the September index would bring the annual inflation rate to approximately 1.7%. For October, a modest 0.2% increase is predicted, lowering the annual inflation to about 1.4%. The forecast for the next 12 months stands at 2.1%, slightly above the Bank of Israel's target range of 1% to 3%. In contrast, Victor Bahar, Chief Economist at Bank Hapoalim, estimates a smaller 0.2% decrease for September. His forecast anticipates a 0.3% rise in October, a 0.2% decrease in November, and a 2% inflation rate over the next 12 months. Jonathan Katz, Chief Economist at Leader Capital Markets, also expects moderate inflation, projecting 2.3% for the coming year. Business sector inflation expectations have fallen to their lowest point since January 2022.
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