Inflation in Israel slows in February below expectations; No imminent rate change expected

ISRAEL - In Brief 16 Mar 2025 by Sani Ziv

Inflation continues to ease: February CPI reading remains flat and below forecasts The Consumer Price Index (CPI) for February remained unchanged, below our expectations for a 0.2% increase, bringing the annual inflation rate down to 3.4%, from 3.8% in January. Core inflation indicators have also eased on a yearly basis yet remain above 3%. The core CPI, excluding housing, clothing, footwear, fruits, vegetables, and regulated items, rose by 3.6% compared to 4.1% in January, while the non-tradable goods index, reflecting domestic inflationary pressures, declined from 4.1% to 3.9%. When adjusting for the VAT increase, the 12-month inflation rate fell below 3%. February CPI analysis: Housing and food inflation continue to rise, but service-sector inflation eases February saw a 7% drop in fresh vegetable prices due to warm weather, but food prices still rose 0.3% for the month and 4.7% year-over-year. Housing costs, accounting for 27% of the CPI basket, fell 0.1% but remain up 4.1% annually, reflecting continued pressure. Domestic tourism prices jumped 3.8%, likely due to increased travel demand in northern Israel. Prices for clothing and footwear fell by 2.2%, in line with seasonal trends. Outbound travel prices declined by 0.6%, following a 12.5% drop since October 2024, while prices of education and health services registered modest increases of 0.2% and 0.1%, respectively. Over the past 12 months, inflationary pressures have primarily stemmed from government-driven price increases, including VAT hikes and higher costs of regulated goods such as electricity, water, and property taxes Monthly Inflation and inflation in the last 12 months The graph below describes monthly...

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