Annual inflation in Israel rose to 3.2% in July from 2.9% at the end of June, according to figures released by the Central Bureau of Statistics on Thursday.
The consumer price index thus rose again above the upper limit of the central bank’s target range of 3%, according to data reported by the Globes economic newspaper.
On a monthly basis, Israel’s consumer price index rose 0.6% in July, beating expectations.
Price increases
Notable price increases included fresh fruits and vegetables, up 3.2%, culture and recreation, up 1.8%, rents and housing maintenance, up 0.8% each, and food and transportation, up 0.5% each.
The Central Bureau of Statistics published the change in housing prices (which are not part of the overall CPI) between April and May 2024 and May and June 2024. On average, prices rose by 0.7%.
This was the seventh consecutive month that prices rose after several months of decline.
After cutting its key interest rate in January, the Israeli central bank left it unchanged in subsequent meetings, citing geopolitical tensions, rising price pressures and loose fiscal policy due to increased spending amid Israel’s war on Gaza.
The Central Bank will issue its next interest rate decision on August 28.
downgrade
This comes two days after Fitch Ratings downgraded Israel’s credit rating by one notch, from A+ to A, as the aggression on Gaza continues for its tenth month and its repercussions in the region.
Fitch said in a statement that the rating downgrade “reflects the impact of the ongoing war in Gaza, heightened geopolitical tensions and military operations on multiple fronts.”
The agency kept its outlook on the rating at negative, which means it could be lowered again.
Fitch is the latest of three ratings firms to downgrade Israeli government bonds since the start of the war on Gaza on October 7, following downgrades by Moody’s and Standard & Poor’s.
The agency expects the budget deficit this year to reach about 7.8% of GDP, compared to the deficit targeted by the Ministry of Finance of 6.6%.
Fitch said its deficit forecast for next year “will reach 4.6%… but it could be higher if the war continues in 2025 and spreads to other parts of the region.”
