Inflation in March slightly above expectations, but core remains low

ISRAEL - In Brief 15 Apr 2024 by Jonathan Katz
Inflation in March slightly above expectations Inflation in March (0.6% m/m 2.7% y/y, following 2.5% last month) was slightly above expectations of 0.5% on average. Core inflation inched up to 2.3% y/y from 2.2% last month but this is due to higher taxation on cigarettes contributing 0.1% to the CPI. Prices of services (excluding housing) increased by 3.5% y/y, similar to last month, and housing rental (OER) prices also stabilized at 2.0% y/y. The PPI excluding fuel declined by 0.2% y/y following -0.3% last month. Housing purchase prices (a separate survey not factored into the CPI) continued to push higher, up 1.0% in the last survey, and up nearly 3% in the last three months. Implications for monetary policy: The inflationary environment remains low, with core inflation close to the mid-range of target. The Governor made it clear that a rate cut was justified last week if it had not been for the elevated geopolitical risks and shekel volatility, which remains the overriding monetary consideration. The same will probably be true at the end of May (next rate decision). Assuming risks subside, a rate cut does appears likely.

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