July print analysis: housing and seasonality pushed inflation up; the shekel offset some of the pressure

ISRAEL - In Brief 18 Aug 2025 by Sani Ziv
July’s CPI rose 0.4% m/m in line with our expectations, leaving headline inflation at 3.1% y/y, still slightly above the target range of the central bank (1%-3%). The print was a classic summer seasonal mix: Airfares increased 11% and domestic holidays 6.6%, both pushing up the index, while clothing & footwear fell 4.2% and partly offset the increase. Housing (renewed leases) rose 1.4% (also seasonal: in the summer period prices increase) and contributed about 0.3pp, the biggest driver to the July reading. Food was flat (0.0%), helped by cheaper poultry/fish (-0.4%). Education and health services edged up 0.1% and 0.2%, respectively. Excluding seasonal components (fruit & vegetables, holidays, overseas travel), we estimate the index advanced 0.3%, almost entirely due to housing. Rents: Within housing, renewed leases rose 2.6%, while leases for new tenants rose 5.4% The graph below shows Israel’s CPI trends, showing monthly changes, the three-month rolling annualized rate (seasonally adjusted), and the 12-month inflation rate. The annual trend remains slightly above the Bank of Israel’s target, mainly due to housing. Israel CPI: monthly and annualized trends Source: Central Bureau of Statistics Israel yearly inflation analysis - still above target Annual inflation remains slightly above the upper bound of the target range, at 3.1% in July versus 3.3% a month earlier. The main drivers continue to be housing (+4.2%) and food (+3.7%), with the latter still reflecting the VAT hike from January 2025. Travel abroad also contributed to inflation: Airfares jumped 18.6%, adding about 0.2 percentage points to the annual CPI. Administrative price adjustments—in electricity, water,...

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