Israel's annual consumer price index (CPI) rose 4.4% in June, the most since November 2008, the Central Bureau of Statistics said over the weekend as another rise in interest rates beckons in order to restrain inflation.
Follow Israel Hayom on Facebook, Twitter, and Instagram
Consequently, the Bank of Israel is widely expected to raise interest rates again at its next meeting on August 22 after three straight increases since April that have taken the benchmark rate to 1.25% (the highest in nine years) from 0.1%. Last week it raised the rate by a half-point.
"Inflation is accelerating broadly," said Leader Capital Markets Chief Economist Jonathan Katz.
"With the Bank of Israel rather influenced by other central banks that are front-loading, it is fair to expect a 0.5% hike on August 22 and 0.5% on October 3 with rates reaching 2.75% in early 2023."
While Israel's inflation rate is around half that in the United States (9.1%) and Europe (8.6%) and the BOI said some price pressure stems from global supply issues and commodity prices, policymakers are concerned over a very low jobless rate of 3% that is pushing up wages.
"We are determined not to let [inflation] get into the ranges [seen] in Europe and the United States, and more than that, to return it during 2023 to the target," Bank of Israel Governor Amir Yaron said last week.
Meanwhile, consumer demand remains robust, contributing to expected economic growth of 5% this year.
Among the prominent rises in prices in June were transportation (2.4%) and housing costs (0.7%), culture and entertainment (0.7%), and health costs (0.6%). Among the prominent price falls in June, fresh fruit and vegetables fell 8.5%, and clothing and footwear fell 3.4%.
Housing prices rose 1.4% in April-May compared with March-April and have risen 15.9% over the past 12 months, up from 15.4% last month, the Central Bureau of Statistics reported.
Rental costs have also increased significantly. Renters who renewed contracts in June started paying 3% more on average, while tenants who moved in June are paying 6.5% more than the previous tenants. After factoring in renters who are mid-contract, rental prices rose 0.4%, on par with the CPI.
Economy Minister Orna Barbivai asked Israel's top supermarket chains to delay for two weeks raising regulated bread prices that were set to jump 20% next week, according to a statement from the Prime Minister's Office on Friday. The chains agreed, it said.
Barbivai also spoke with representatives of major bakeries to find a solution to higher raw materials costs without harming consumers.
Prime Minister Yair Lapid said he would enter into discussions with relevant authorities on Sunday.
The shekel gained to 3.48 per dollar from a rate of 3.49 after the inflation report.
Subscribe to Israel Hayom's daily newsletter and never miss our top stories!
