Sharon Wrobel is a technical reporter for The Times of Israel.
Consumption in Israel increased by 5. 3% compared to 2022, up from 2. 8% last year, due to emerging housing, transportation, communications and food costs.
Annual inflation stood at 5. 3% in December, holding a 14-year high for a straight month and putting more pressure on the Bank of Israel to raise interest rates the following month in an effort to keep costs in check.
The customer value index (CPI), a measure of inflation that tracks the average household property charge, rose 0. 3% in December from November, while analysts had expected between 0. 3% and 0. 4%, according to the Central Bureau of Statistics. Annual CPI of 5. 3%, the highest since inflation reached 5. 5% in October 2008.
In December, there were dramatic increases in the transportation charge, which increased to 1. 1%; housing and medical services, 0. 6 per cent each; and housing maintenance, up 0. 2%, offset by declines in new fruit and vegetables, up 2. 8%; culture and entertainment, 1. 4 per cent; and clothing and footwear, down 1 percent, according to the Bureau of Statistics.
In 2022, shipping and communication costs increased by up to 9. 2%, housing by 6. 3%, apartment costs by 5. 7%, and food costs by 4. 9%. Since 2017, customer costs have increased 9% overall, according to the statistics bureau.
However, inflation in Israel remains below that of the countries with the highest evolution. In the United States, customer costs from November to December fell 0. 1%, the first drop in more than 2. 5 years, due to declining gasoline costs. On an annual basis, inflation slowed to 6. 5% in December, from a year earlier, from 7. 1% in November, adding to symptoms that the U. S. Federal Reserve is expected to slow to 6. 5% in December. The US will slow interest rate hikes in the coming months.
Inflation has also fallen, albeit to a lesser extent, in Europe. After months of emerging costs, annual inflation in the 19 countries that use the euro fell for the moment in the consecutive month of December, but still stood at 9. 2%. % in November, as energy costs fell from the summer peaks.
In Israel, the central bank this month raised interest rates for the seventh time in a row, raising its key interest rate through 50 core issues to 3. 75%, in a further attempt to slow down inflation. The central bank must bring inflation back to the government’s diverse target of 1% to 3%.
Bank of Israel Governor Amir Yaron noted that inflationary tension is expected to continue for the next two months before starting to gradually subside, albeit at a slower rate than expected. Central bank economists now expect inflation to decline to 3% in the coming years, from 2. 5% forecast in October and 2% in 2024. The economy is expected to grow at an annual rate of 2. 8 cents in 2023, revised down to 3 cents in October and 3. 5 cents in 2024.
The bank’s research arm sees room for further interest rate hikes, with the key rate expected to hit 4% next year, down from 3. 5% from its previous estimate.
Bank Leumi economists expect the central bank at its next financial policy meeting on Feb. 20 to raise loan prices through 25 fundamental issues to four percent.
The central bank’s forecasts were released ahead of a new government plan to take primary responsibility for life announced Wednesday with maturity. Increases affecting basic services, fuel, and taxes on municipal assets will be frozen or reduced.
The measures come with a one-year freeze on municipal asset tax rates; reduce excise taxes on fuel through NIS 0. 10 per litre until the end of 2023, reversing the fuel value of NIS 0. 09 accumulated in January, with 95-octane petrol values set per month by the government; reduce the value of accumulated electricity from 8. 2% expected in January to only 2. 5%; and, similarly, reduce the projected accumulation from 3. 5% in water values to just 1%.
Bank Leumi chief economist Gil Bufman said government measures combined with a strengthening of the shekel, which has gained about 4% over the past week, moderate value indexes for January and February.
“These are unique value adjustments and not measured ones of a continuous nature,” Bufman wrote in a report on Sunday ahead of the release of the CPI figures. 12 months, they deserve to continue hovering around the five percent level, before they start to fall. “
Leumi had forecast a 0. 4% increase in December’s CPI, which would push annual inflation to 5. 4% in 2022. In 2023, the rate of increase in the CPI is expected to be around 2. 50%, according to Leumi.
AP contributed to this report.
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