Consumer prices fell for a third straight month in November, the Central Bureau of Statistics said on Monday. But even though many economists expect another month of declines in December as well, they are discounting deflation concerns and don’t expect the Bank of Israel to lower interest rates further.
The consumer price index fell 0.2% last month, bringing the decline in prices over the past 12 months to 0.1% or, not counting housing prices, 1%, the CBS said. The big declines in November were in transportation and communications prices, which fell 1.2% and 0.9%, respectively.
Food prices were down 0.2%, with fresh produce prices down 5.3%.
“The CPI declined more or less within expectations. We are expecting price rises to remain low, among other things because of sharp competition in the food industry,” said Idan Azoulay, head of investments at Epsilon Investments. “We assume that the Bank of Israel won’t adjust interest rates in the coming month.”
Ayalet Nir, chief economist at Yetzirot Investment House, said the December CPI would also be negative due to scheduled rate cuts for water, electricity and the continued decline in world petroleum prices.
The central bank’s base lending rate is at a record low 0.25%, amid low inflation and expectations in the capital market that prices will rise just 0.4% in the next 12 months – well under the government’s target of 1% to 3%.
While fears about deflation and its negative impact on consumer spending have receded, some economists said Monday that the central bank may take measures to spruce up economic growth.
Jonathan Katz, economist at Leader Capital Markets, said the one concern is housing prices. Rents rose 2.9% in the 12 months through November, a faster pace than in October as well as the 1.4% rise registered in the CBS’ last housing price survey.