2023-12-17 15:30:28
Yoni Penning, chief strategist of the transaction room at Mizrahi Tefahot, highlighted the surprising timing of the return of global inflation to target ranges from a geopolitical perspective. The recent start of the war in Ukraine has raised questions about the potential indirect effects on inflation and whether the return to normality will be faster than expected.
In Israel, the inflation rate fell below the analyst consensus, decreasing by 0.3% and moderating significantly to 3.3% annually. Various indicators of the Central Bank, such as the index excluding housing, vegetables and fruits, and energy, moved close to the upper 3% level of the Bank of Israel’s inflation target. The decrease in pricing of flights abroad and tenant-owned housing services were responsible for much of the downward surprise in the index.
On the negative side, there was weakness in the prices of tradable products, similar to the global trend. The continued strengthening of the shekel was expected to continue this trend from a local point of view. However, food prices continued to rise, mainly due to late pricing following increases in the previous month. Car insurance prices also continued to rise, contributing significantly to the overall inflation.
In terms of Israel’s current account, the surplus continued to expand, reaching the highest level since 2021, with most of the increase due to payments abroad and excess returns of capital markets abroad.
In the U.S., the Fed left the interest rate at 5.5%-5.25%, but there was a significant change in the Fed’s language. The addition of a stipulation that it is not clear whether additional tightening will be required later on stood out, and economic activity was noted to have slowed down from the high rate during the third quarter.
Overall, the global inflationary picture is positive but far from what could be expected at this point, and central banks in the UK and Eurozone are more skeptical about being able to cut interest rates anytime soon. The market is closely watching for further developments as geopolitical events continue to unfold.
#Inflation #Israel #falling #due #moderation #consumer #sentiment