Low inflation in November, but rental prices accelerate

ISRAEL - In Brief 16 Dec 2024 by Jonathan Katz

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Geopolitics: Israel’s geopolitical situation has greatly improved, following the ceasefire in Lebanon, the end of the Assad regime (breaking the flow of armaments from Iran to Hezbollah), and the weakening of Iran in the region (having lost an important ally in Syria). Focus is now turning to pressure to reach a ceasefire in Gaza. Politics: On a more negative note, the government is returning to the judicial overhaul policy and hesitating whether to fire the Attorney General. Inflation in November surprised on the downside Inflation (-0.4% m/m, 3.4% y/y, down from 3.5%) was below expectations of -0.2% to -0.3% m/m. Core inflation remained stable at 3.3% y/y. Housing rental prices accelerated to 4.0% y/y from 2.9%. Other services slowed to 3.7% y/y from 4.1%. Core goods remained nearly stable at 2.1%. Inflation forecast: we currently expect inflation to reach 2.4% NTM with less supply constraints (airfare, produce, labor) and a strong shekel slowing inflation despite higher government-controlled prices and VAT. Policy rates likely to come down in April, and we expect three cuts by end-2025, possibly four. The fiscal deficit declined to 7.7% GDP This decline in November from 7.9% last month is due to the base effect of a huge deficit last year when the war broke out. More importantly, tax revenues remain strong despite the escalation in the North. Actual tax revenues in 2024 will most likely overshoot the MoF forecast. The MoF raised 460ml USD in Brazil at a rate of 5.278 (4-year duration). Consumer confidence declines in November Consumer confidence declined in November to Covid lows. This survey was most likely executed before the ceasefire on November 27th. We expect ...