Israel’s Inflation Holds at 1.9% as Interest-Rate Cut Hopes Grow

Israel’s annual inflation rate remained at 1.9% in May 2026, after the consumer price index fell 0.3% from April, the Central Bureau of Statistics said Monday evening. The reading came days after Bank of Israel Governor Amir Yaron signaled that the low inflation environment could allow an interest-rate cut if the trend continues.

The annual rate stayed unchanged because May 2025 also saw a 0.3% monthly decline. Inflation is now inside the Bank of Israel’s 1% to 3% target range, which has raised expectations that monetary easing may follow if prices remain subdued.

The largest monthly drops were in fresh fruit, down 4.9%, transportation, down 2.7%, and furniture and home equipment, down 0.1%. Offsetting those declines were increases in clothing, culture and entertainment, and housing, which rose 0.6%. Rent costs kept climbing, with renewing tenants paying 2.5% more on average than before, while new tenants faced a sharper 6.8% increase.

Separate housing-market data showed apartment prices fell 0.3% in March-April 2026 compared with February-March 2026. The steepest declines were in Jerusalem and Haifa, while Tel Aviv and the Central District saw slight increases. On an annual basis, home prices were down 1.3%, and new apartments fell 3.9%. Land prices also weakened further, after a 4.9% annual drop in 2025. At the same time, the residential construction inputs index rose 0.6% in May and 3.5% over the year, driven mainly by a 5.3% increase in labor costs in the construction industry.