Negative inflation y/y in Q1 will put pressure on the MPC to act

ISRAEL - Report 17 Feb 2020 by Jonathan Katz

Inflation in January (0.3% y/y) came in at the low end of consensus, with core inflation moderating to 0.35% y/y. Declining inflation y/y is expected to continue in the coming months (-0.3% in March), which will put pressure on the MPC. Our inflation forecast for the NTM stands at 1.1%, of which higher taxation is expected to contribute 0.4%. Nevertheless, robust GDP growth (3.3% excluding import taxes in Q419) will support the more hawkish position.

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