Consumer prices stay steady in June, in latest sign of easing inflation
Price drops on fresh produce, clothes and furniture outweigh hikes elsewhere, matching trends around the world as higher interest rates smother spending
Israel’s consumer price index did not budge in June, beating predictions that prices would continue to rise and offering evidence that inflationary pressures may finally be easing, the latest sign of relief for hurting Israeli purchasers.
According to the Central Bureau of Statistics, the CPI remained unchanged from May to June, with price hikes in some sectors balanced out by drops in others.
Year over year, inflation fell to 4.2 percent, down from 4.6% a month earlier. Inflation has gradually fallen off since reaching a high of 5.2% in February.
The slowdown matches trends in the US and elsewhere as higher interest rates clamp down on borrowing, weakening demand and bringing prices lower.
The Tel Aviv Stock Exchange was closed on Friday, but shares jumped globally on similar signs of slowing inflation from around the world, which have buoyed hopes among traders that the US Federal Reserve will soon halt a string of rate hikes.
Earlier this week, the Bank of Israel decided to keep its benchmark interest rate steady at 4.75% in light of the consumer cool-down.
Over the past year, the Bank of Israel has steadily hiked the rate from a record low of 0.1% in April 2022 in a bid to rein in inflation.
The 4.2% inflation figure beat expectations that it would see a less drastic fall to 4.4%.
The drop was largely fueled by falling prices for fruits and vegetables (4.6%), clothing (3%), and furniture (0.8%).
On the other side of the balance sheet, food prices overall increased by 0.6%; health by 0.4%; and education, culture and entertainment by 0.2%.
The price of rent went up by 3.9% for renters renewing contracts and 9.8% for those entering new contracts.
Locally, the sharpest drop in prices was in Tel Aviv where prices went down by 1.1%. In Jerusalem, prices went up by 0.3%.
Inflationary pressures have also been driven by political uncertainty around the Israeli government’s proposed judicial overhaul, which has harmed investor confidence and helped weaken the shekel.
Bank of Israel governor Amir Yaron has estimated that the shekel weakness has led to “excess” inflation of at least 1%, while indicating that if the trend continued the central bank would need to keep raising borrowing costs.
Depreciation in the local currency raises the price of imported goods such as food and gas and travel abroad and leads to higher inflation.
Sharon Wrobel contributed reporting.
