Tomorrow at 18:30 the Israeli Consumer Price Index for the month of October will be published which will indicate the level of inflation in Israel. Most analysts expect an increase of about 0.5% in the index for the month of October, to an annual inflation level of about 5%.
As in every month, the items that will see the price increase are, among others, the prices of food, the prices of fruits and vegetables and real estate (the housing price index). The section that many believe will see the highest increase is the food price section, both because of seasonality, but also due to the fact that we passed the Tishrei holidays, and the promotions that were previously given during the holidays were no longer given during the month of October.
In the meantime, it is also important to consider the demand for suppliers in the State of Israel – Kimberly Clark, Unilever and more to raise prices. To this, most of the marketing and retail chains in the State of Israel said that they will refuse this request and that they are ready to absorb the damage to the consumer, but now we have to wait and see what will happen in the end.
The annual inflation index shows, among other things, how “more expensive” it is to live here. Money, like many other subjects in the economy, is based on supply and demand – the more of it, the less it is worth, and the less of it, the more it is worth. Inflation is rising worldwide and is breaking records of several good decades, when inflation in the USAthe European Union, England, the Netherlands (as of September), China, Turkey and more continue to climb, this after the governments printed a lot of money which they gave to the big companies in the market in the middle of last year.
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Also, the consumer price index directly affects the interest rate of the Bank of Israel. At the beginning of October, the interest rate in the economy increased by about 0.75%, and it now stands at about 2.75%. This is the fifth time in a row that the interest rate has risen in a row, this is the first time in the last thirty years.
The prime interest rate is now about 4.25% – the next interest rate decision will take place on November 24th.
in the previous month, when the index for the month of September was published In Israel, the country’s price index rose by about 0.2% on a monthly basis, and by about 4.6% on an annual basis. Housing prices jumped this month by about 1.9%, and by 19% in the last year, when the rent rose by 0.7%. For tenants who changed apartments this month – the rent jumped by about 8%.
The Bank of Israel now estimates that the index will indeed support the timing of the Tishrei holidays, and that the increase in the dollar exchange rate will also affect the index. On the other hand, the Bank of Israel points out that as long as the stability in energy, commodity and shipping prices around the world is maintained, inflation in Israel will stabilize as well.
The Bank of Israel now expects growth of about 6%, an increase of 1% compared to the forecast in July. The bank expects growth of only about 3% in the coming year, compared to a forecast of about 3.5% in July. According to the bank, inflation at the end of 2023 is now expected to be around 2.5%, and in 12 months (next October) it will be around 2.7%. The Bank of Israel now expects an interest rate of about 3.5% in about a year.
For several months now, the Bank of Israel has been sticking to an unequivocal policy of sharply raising interest rates, in order to show that the bank does not intend to give up so quickly on the increase in the consumer price index. This choice was made by the Bank of Israel, despite the fact that in recent weeks the risks of a slowdown and recession in the global economy have only increased.
As expected, if the Bank of Israel continues to raise interest rates, the loans you took will become more expensive. This is especially true for the mortgage loan, which most of the apartment owners in the State of Israel had to take in order to finance the purchase of the apartment. If the interest rate goes up, the payment you will return for the mortgage will also go up.
In the meantime, many economists predict that the Bank of Israel’s interest rate will rise “only” by 0.5% in the coming month, both “thanks” to the strong labor market, while few believe that there will be major changes. It is precisely in the industrial sectors that the lack of workers is reported to be easing, but in the services sector it is reported that the problem is more difficult.
In the latest interest rate increase, the Bank of Israel narrowed the interest rate gap between Israel and the US, where the interest rate increased by about 0.75% to a range of 4-4.25%. Inflation in the US now stands at about 7.7% at an annual rate.