November’s CPI in line with expectations

ISRAEL - In Brief 16 Dec 2020 by Jonathan Katz
Inflation in November declined by 0.2% m/m and declined by 0.6% y/y (from -0.8% y/y in October). This was in line with market expectations (and mine). Core inflation (the CPI excluding energy and fresh produce) moved higher to -0.2% y/y from -0.4% last month, but remains in negative territory. We note that housing rental prices did moderate significantly, up 1.1% y/y from 1.7% y/y last month, most likely due to the impact of the second closure on softer demand. Our current inflation forecast stands at a 0.1% m/m in December, -0.4% in January and 0.4% in the next 12 months. This assumes further shekel appreciation, higher commodity prices, higher housing rental prices and no tax hikes. We also assume a gradual economic recovery in the second half of the year. We do not expect further monetary accommodation, and actually we expect some tapering of the bond purchasing program in the second half of 2021 (assuming mass vaccinations results in a rebound in growth).

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