Prices rose a hair less than foreseen in April
April is a month featuring the Jewish holidays and the transition between seasons; typically, the consumer price index climbs high in April and this year, but the consumer price index rose only 0.6%.
Allaying fears that inflation is spiraling up violently, and bewildering economists, the consumer price index rose only 0.6% in April.
April is a month featuring the Jewish holidays and the transition between seasons: new styles of clothing and shoes stock store shelves, replacing end-of-winter sales. Typically, the consumer price index climbs high in April and this year, analysts had predicted an increase of about 0.8%, on average.
Indeed, inflation is running fast. Based on trend data, from January to April this year, in annualized terms - meaning if the trend was extrapolated to 12 months - the CPI increased by 4.8%.
The biggest increases were in prices of clothing and shoes, which rose by 5.4%. Prices of fresh seasonal fruit rose by 4.2%, and housing prices increased by 0.7%.
Fresh vegetables actually dropped by 0.7% in price.
So, based on the April CPI, which increased by less than expected, is the Bank of Israel likely to raise interest rates, or not?
Before the release of the April CPI, most analysts had expected the governor of the central bank, Stanley Fischer, to raise interest rates at month-end, for two reasons: to curb inflation and to further dampen the upward spiral in housing prices.
But under the circumstances, suggest some, Fischer may elect to wait another month before raising the rate again from its present level of 3%.
Others aren't so sure. Rafi Guzlan, chief economist at Leader Capital Markets, says that one month's unexpectedly low price increase does not a trend make. Inflation will remain high in the year to come because of the (still ) low level of interest rates and the high level of commodity prices. While Fischer may elect to keep Israeli rates unchanged for June, he'll be raising them a lot before the year is done, Guzlan predicts.
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