Moderate change to Consumer Price Index would would bring Israel's annual inflation rate below 3% target, allowing Bank of Israel to potentially cut interest rates.
Israel's Consumer Price Index (CPI) for January 2024, which will be published on Thursday, is expected to be low and likely hover between no change and a modest increase of 0.1% to 0.2% per month - which would bring Israel's annual inflation rate below the Bank of Israel's 3% target.
A particularly low CPI could possibly help the Bank of Israel's Monetary Committee, headed by its governor Prof. Amir Yaron, to further cut the central bank's benchmark interest rate, despite international credit agency Moody's warning of the opposite.
The CPI is expected to be low even though local taxes rose by 2.68% and gas prices increased by 28 agorot (0.28 shekels/$0.075) in January. Additionally, price hikes were recorded among various consumer products, increases that were expected to heat up in February, during which electricity prices also rose by 2.6%.
The January 2023 CPI went up by 0.3% - therefore any index that increases at a rate lower than this will reduce Israel's inflation rate toward the government's target for the entire year, standing at 1% to 3%, possibly allowing the Bank of Israel to cut its benchmark interest rate by 0.25 percentage points to 4.25%.
Interest rates in the U.S. are not expected to come down due to the relatively high CPI.
Source - Ynet - Image - Yossi Aloni/Flash90