Israel consumer price increases seen slowing

Consumer prices in Israel in May rise at more than half the rate than was forecast, the Central Bureau of Statistics says, easing pressure on the Bank of Israel to hike interest rates again in July.

The consumer price index (CPI), a measure of inflation that tracks the average cost of household goods, increases by 0.2% in May, below analysts’ expectations of between 0.5% and 0.6%.

The May print brings annual inflation over the past 12 months to 4.6%, after hovering around 5% for more than six months. That’s after the April CPI monthly figure of 0.8% surprised to the upside and was the highest reading since July 2022.

In May, increases were seen in the cost of fresh fruits, which jumped 11%, culture and entertainment was up 1.1%, and housing rose 0.5%. These were offset by price declines of fresh vegetables, which fell by 2.9%, while furniture and home equipment and clothing and footwear costs were down 0.8% each.

Rents on renewal of contracts rose 3.6% in May unchanged from April and rents on contracts for new tenants went up 8.6% versus 9% in April.

Over the past year, the Bank of Israel has steadily hiked its benchmark interest rate — to 4.75% in May this year from a record low of 0.1% — in a bid to rein in inflation. Despite the steps, inflation has been hovering above 5% in annual terms for more than six months, far above the government’s target range of 1% to 3%.