Yoni Penning, chief strategist of the transaction room at Bank Mizrahi Tefahot (photo by Ofer Hagiov, Magma Images)
For the first time since 2014, inflation in Israel is equal to that of the USA. However, it is worth noting that the annual perspective is somewhat responsible for the decrease. And in this sense, we see it as unrepresentative. In particular, the influence of the energy components on the index is greater in the USA. To the extent that the effect of the start of fighting in Ukraine is included in the base index of the annual inflation, the current index expresses a substantial decrease in energy prices in the US, relatively speaking.
More in-
Similarly between the two countries, the housing section continues to be the main driver of overall inflation. On the other hand, in light of the more substantial increase in the local population, we will expect more significant inflationary pressures from the local housing section, relatively speaking. Similar to the drop in energy prices, and as we gain relative stability in the shekel in the coming months, it will be expected that more tradable products will find themselves pushing inflation down.
Food prices are of course a prominent example of this. And in the more distant future, against the background of the drop in global transport prices, also larger tradable products. The increase in the prices of services, on the other hand, is not surprising. and expresses, in our estimation, at this stage, the increase of inputs in these branches.
The US markets continue to price in a relatively high probability of a 0.25% interest rate hike by the Fed, in early May. Similar to the trend of the past year, as long as the April index is not lower than current expectations, we will also expect a similar response from the Bank of Israel on May 22.
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