Prices in Israel Rose in October for First Time in 3 Months

But economist say decline will resume and no rate cut is in store.

Tomer Appelbaum

Israeli consumer prices rose 0.1% in October, their first rise in three months, the Central Bureau of Statistics reported Sunday, even though the wave of terror attacks kept shoppers at home and the government cut the value-added tax by one percentage point to 17%.

However, the Consumer Price Index was down 0.5% for the first 10 months of the year. Economists said the increase was not a sign that inflation was returning anytime soon. “We believe the impact of the current terror wave on the price environment is relatively low,” said Guy Yehuda, senior economist at Psagot Investment House. “But the price environment is expected to remain restrained in the coming months, and the rate of inflation will only turn positive toward the middle of next year.”

Ayelet Nir, chief economist at Yetzirot Investment House, said the CPI would likely fall a cumulative 0.9% over the next three months because of lower world energy prices and government measures, such as lowering compulsory insurance rates.

In spite of continued negative inflation, economists were doubtful the Bank of Israel would cut its base lending rate from the current record low of 0.1%. “Recent remarks by senior officials at the bank show the option of another interest rate reduction or expansion steps has been moved off the table,” said Yehuda.

Among the categories lifting prices in October was an 8.6% increase in fresh produce prices and a 3.2% increase for apparel and shoes. Home prices continued higher: without the housing component, the CPI would have fallen 1.2%, the statistics bureau said.