Low inflation is supportive of lower rates

ISRAEL - Report 15 Oct 2019 by Jonathan Katz

September's CPI came in according to consensus (-0.2% m/m and 0.3% y/y). There were no major surprises in the various CPI items. Housing (rental) prices (24.5% of the basket) moderated to 1.8% y/y from 2.2% in August. This is significant but this item often fluctuates greatly on a monthly level and basically has remained in the 2%-3% y/y range over the past year. Wage growth and some decline in housing inventory are supportive of higher housing rental prices going forward. Core inflation (the CPI excluding energy and fresh produce) moderated slightly, to 0.8% y/y from 0.9% in the previous two months. Although this is a minor move, it is moving further away from the inflation target, as is headline inflation (0.3% this month, down from 0.6% in August).

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