According to today’s consumer price index (CPI) report, inflation for the month of November increased by 0.1%, in line with market expectations. Though not significant on a monthly basis, yearly inflation rose to 5.3% from 5.1% in October, making it the highest rate in 14 years. This news puts extra pressure on the Bank of Israel to raise interest rates at its meeting next month.
According to the Central Bureau of Statistics, the fastest increases were in rental prices, which increased by 8.1%; the cost of housing, up 0.6%; apartment maintenance, up 0.3%; and food, which increased by 0.2%. Declines took place in the prices of fresh fruits and vegetables, down 4.3%, and footwear, down 1.5%.
On the bright side, Israel’s inflation rate remains much lower than that of most developed countries. According to the data issued on Tuesday, the CPI in the United States grew 7.1% year on year in November, down from 7.7% a month earlier and a high of 9.1% in June. The CPI reading in the UK stood at 10.7% for the same time period, down from 11.1% in October. And annual inflation in the EU was 10% in November, down from 10.6% in October, making it the first decline since June 2021.
Having said that, the Bank of Israel is on a quest to keep inflation within its yearly target range of 1%-3%. This was the cause of the 0.5% hike in the benchmark interest rate last month, from 2.75% to 3.25%. It was the sixth monetary tightening step taken by the central bank since April when officials began raising the rate from an all-time low of 0.1%.
Interestingly, property values continue to rise despite the increase in interest rates. The comparison between September-October 2022 to August-September 2022 reveals a 1.2% increase in home prices, bringing the total increase since September-October 2021 to 20.3%. This is the largest annual gain in real estate prices over the past decade.
Meanwhile, the Finance Ministry cut its 2023 growth prediction for Israel’s economy to 3% from 3.5% cited a few months ago, noting a dip in consumer spending and a deteriorating global economy. According to the ministry’s projections, growth this year will be 6.3%.