The Israeli inflation changed direction and declined by 0.3% for the first time since February 2010. This is a shift direction after the CPI rose by 0.4% in June 2011.
In the recent Central Bureau of Statistics report regarding consumer prices changes, the Israeli inflation (CPI) declined by 0.3% during July 2011 compared with June’s CPI (see chart below). The CPI sans energy declined by 0.2% during July and the CPI sans fruit and vegetables also fell by 0.2%.
The main sectors that contributed to the falling inflation rate during July were: Clothing (8.6% decrease), gasoline and fuels (3.0% decrease) and footwear (6.3% decrease). On the other hand, the following sectors inclined during last month: housing rent (0.7% increase), and cars (0.9% increase).
During the last twelve months (July 2010 to July 2011) the Israeli inflation rose by 3.4%; the CPI without fruit and vegetables increased by 3.5%; the CPI without energy inclined by 3.1%; and the CPI without housing rose by 2.7%.
The Bank of Israel kept the August basic interest rate unchanged at 3.25%; the rise in recent months of basic interest rate (see chart above) doesn’t seem to have much of an effect in curbing the rising inflation. The recent change in direction in the Israeli inflation was mainly due to the drop in the global crude oil prices in recent months.
Despite the recent change in direction, Bank of Israel is likely to continue examining the Israeli inflation and will likely to eventually raising the basic interest rate at least one more time by the end of 2011. The main problem is that raising the basic interest rates will continue to strengthen the Israeli currency mainly against the US dollar as it did in recent months.
Lior Cohen, M.A. economist and blogger at IBR and Trading NRG.
For further reading:
- Bank of Israel kept interest rate unchanged at 3.25%
- CPI inclined by 0.4% during June 2011
- CPI inclined by 0.5% during May 2011
- CPI inclined by 0.6% during April 2011