Israel's Consumer Price Index Falls Sharply in December - Inflation Remains Above Target: 3.2%

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by Ifi Reporter Category:Government Jan 15, 2025

Israel’s Consumer Price Index (CPI) fell more sharply than expected in December 2024, dropping by 0.3%—a steeper decline compared to the 0.1% drop that had been anticipated. This decline brings the annual inflation rate for 2024 to 3.2%, which is still above the upper end of the Bank of Israel’s target range of 1%-3%. However, inflation showed a slight slowdown from November's rate of 3.4%.

The Central Bureau of Statistics reported notable declines in several categories. Fresh vegetables and fruit saw a significant seasonal drop of 5.6%, while the culture and entertainment sector fell by 2.0%. Footwear and transportation prices also dropped by 0.8% each.

Conversely, certain categories saw price increases in December. Clothing prices rose by 1.9%, health costs increased by 0.4%, housing rose by 0.3%, and food prices saw a modest increase of 0.2%.

Rising Housing and Food Prices

While the CPI decreased in December, the prices of essential goods remained high. Food prices surged by 4.3% year-over-year, outpacing the overall index. Housing costs, particularly rental prices, increased by 4.1% during the same period.

Apartment Prices Continue to Climb

Apartment prices in Israel are continuing their upward trend, despite not being included in the official CPI. Prices rose by 0.6% in October-November 2024 compared to September-October 2024. This translates to an annual increase of 7.8% in apartment prices.

The sharpest price hikes were recorded in Tel Aviv, where apartment prices rose by 1.2%, followed by Jerusalem at 0.4%. The north and south of Israel saw apartment prices rise by 0.4% as well. On an annual basis, Haifa led the way with a 11.7% increase in apartment prices, followed by the north at 10.2% and Tel Aviv at 8.8%.

Inflation Outlook for Early 2025

Despite a relatively low inflation rate in December, analysts forecast that inflation will climb in the first quarter of 2025, potentially reaching 4% in January. This expected rise is partly attributed to increases in taxation and VAT. Inflation is predicted to fall back below the Bank of Israel's target range by August 2025.

Bank of Israel Holds Interest Rates Steady

In response to ongoing inflationary concerns, the Bank of Israel has kept interest rates unchanged at 4.5% for the past eight consecutive policy meetings. The latest forecast from the Bank of Israel’s research division indicates that the central bank may reduce interest rates by one or two percentage points in the coming year, bringing the rate to between 4% and 4.2% by the end of 2025.

 

 

 

 

 

 

 

 

 

 

 

 

 
 
 
 
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