Israel’s May consumer price index falls 0.3%, led by transport drop

Israel’s consumer price index fell 0.3% in May 2026 from April, a sharper drop than analysts had expected, after forecasts called for a decline of 0.1% to 0.2%. Annual inflation stayed unchanged at 1.9%, still within the Bank of Israel’s 1% to 3% target range.

The Statistics Bureau also reported a decline in housing prices. In March-April 2026, compared with February-March, overall home prices fell 0.3%, and new-home prices fell 0.1%. The bureau said that new-home prices excluding government-subsidized sales were down 0.7%, underscoring how subsidized programs such as Price Target, Price for the Winner and Discounted Apartment continued to push the new-housing index up rather than down, as also happened in the previous monthly release.

Within the CPI, transport fell 2.7%, while furniture and household equipment slipped 0.1%. On the upside, clothing rose 1.9%, culture and entertainment climbed 1.1%, and housing increased 0.6%. Rent for tenants renewing leases rose 2.5%, while rent for new tenants increased 6.8%.

Market strategists expect inflation to remain relatively muted over the next year. Bank Hapoalim chief market strategist Mody Shafrir sees inflation at about 1.7% over the coming year and 1.9% to 2.0% for all of 2026. Leader Capital Markets said market inflation expectations fell to 2.15% from 2.32% last month, arguing that fighting in the north and fears of renewed fire from Iran are still curbing consumption and there is no sign yet of pent-up demand that could reignite prices.