Inflation Rebounds in Israel as Prices Set to Rise Again Amid Energy Costs

After several months of declining inflation, Israeli economists now predict a renewed rise in price increases in the coming months. Psagot Investment House economists forecast that the Bank of Israel will reduce interest rates twice over the next year but will hold off on further cuts until the medium-term inflation outlook becomes clearer. The consumer price index for August is expected to increase by 1%, mainly due to rising energy and transportation costs, pushing annual inflation to approximately 1.8%. Over the next 12 months, inflation is projected to reach 2.1%, assuming the exchange rate remains stable. This shift is largely attributed to renewed conflict between the United States and Iran, which has driven oil prices higher. Unlike the price surge in March, this time the increase coincides with a further weakening of the Israeli shekel, amplifying the impact of energy price hikes on Israeli consumers. Psagot analysts suggest that while the Bank of Israel may lower interest rates twice more this year, it will proceed cautiously to avoid premature rate cuts, given the possibility that the current inflation decline is only temporary.