October Inflation Falls Unexpectedly, Housing Prices Also Decline
Translated & summarized from TheMarker by baba
Israel's inflation rate unexpectedly fell to 1.1% in October, with the Consumer Price Index dropping 0.1% against forecasts. Housing prices also declined, with the national average price in Q3 2026 down 5.7% from the prior quarter. Economists predict the Bank of Israel will keep interest rates unchanged at 3.25% due to inflation stability, U.S. rate hikes, and geopolitical uncertainty. Decisions on interest rates are also linked to the formation and economic policies of a new government.
The story in 5 lines · by baba
- Israel's October inflation rate fell to 1.1%, below the Bank of Israel's target range.
- The Consumer Price Index decreased by 0.1% in October, contrary to economist predictions.
- Housing prices saw a 0.2% drop in August-September 2026 compared to the previous period.
- The average national housing price in Q3 2026 decreased by 5.7% from the prior quarter.
- Economists expect the Bank of Israel to hold interest rates at 3.25%.
Israel's Consumer Price Index (CPI) for October decreased by 0.1%, defying economists' predictions of a 0.2% rise. This decline brought the annual inflation rate to 1.1%, down from 1.6% the previous month, and kept it below the Bank of Israel's target range of 1% to 3%. The October 2025 index, which rose by 0.5%, has now been removed from the annual inflation calculation.
Notable price increases in October were seen in clothing and footwear (up 4.1%), fresh vegetables (up 3.5%), apartment maintenance (up 0.4%), and home furnishings (up 0.3%). Conversely, significant price drops occurred in transportation (down 1.4%) and owner-occupied housing services (down 0.5%).
The housing market also experienced a downturn. The index for housing prices fell by 0.2% in August-September 2026 compared to July-August 2026. Year-over-year, the index dropped by 1.5% in the same period. New apartment prices decreased by 0.7% in August-September 2026 compared to the previous two-month period. The average national housing price in the third quarter of 2026 was NIS 2.2867 million, a 5.7% decrease from the previous quarter and a 1.5% decrease from the third quarter of 2025.
Regional variations in housing prices were observed. While prices rose in Tel Aviv (up 12.1% in Q3 2026 vs. Q3 2025), Netanya, Holon, and Hadera, significant drops were seen in Bat Yam (down 8.5%), Herzliya (down 7.2%), Jerusalem (down 5.2%), and Rehovot (down 4.0%).
Economists anticipate the Bank of Israel will maintain its interest rate at 3.25% in its upcoming decision. This expectation is based on inflation remaining within the target range, the anticipated rise in U.S. interest rates potentially weakening the shekel, and ongoing political and geopolitical uncertainty. The central bank's recent statement highlighted significant fiscal uncertainty, particularly regarding the defense budget, and indicated that interest rate decisions would be influenced by the formation and policies of a new government.
