Inflationary pressures in Israel show no signs of abating, as the latest data from the Central Bureau of Statistics reveals a 0.8% increase in the consumer price index for the previous month. Over the past year, the index has risen by 5%, maintaining the same level as in March.
The prevailing expectation among economists was for a milder rise in the index, ranging from 0.4% to 0.5% in April, resulting in a decrease in annual inflation to approximately 4.6% to 4.7% compared to the previous month’s 5%.
During this time period, prices increased noticeably across a number of different sectors. Fresh vegetables and fruits saw a 4% increase, transportation costs rose by 2.5%, clothing and footwear prices surged by 1.9%, entertainment expenses climbed by 1.8%, housing costs increased by 0.5%, and the food category saw a 0.4% rise.
Conversely, certain sections experienced price declines. Apartment maintenance costs decreased by 0.5%, and furniture and home equipment prices dropped by 0.2%. Rent, excluding public housing, increased by 0.3%. It is important to note that the monthly rent for tenants renewing their contracts witnessed a substantial 3.6% increase, while new tenants faced a significant jump of around 9% for apartments where the tenancy changed.
Inflation in Israel has persistently exceeded the Bank of Israel’s target range of 1% to 3% annually since its ascent began in early 2022, reaching its peak in January 2023 at a rate of 5.4%. Consequently, the Bank of Israel adopted an assertive approach, raising interest rates aggressively to counteract rising inflationary pressures.
The elevated consumer price index will undoubtedly have an impact on the upcoming interest rate decision by the Bank of Israel, slated for May 22. The current interest rate stands at 4.5%, and market estimates place a 70% probability on a further rate hike, even prior to the release of the recent inflation data.
Meanwhile, the real estate market shows no signs of improving. Apartment prices showed little change between January and February and February and March of this year, according to a comparison of property transaction prices. However, there was a 0.1% increase in the price of new appartments.