What do the bank economists in Israel think of the inflation figure that came out in the US?

In view of the drop in the price of oil and the price per gallon that already reaches 4 dollars, the growth of the consumer price index in the US has zeroed out and stood at 0% in July, below the expectation of a 0.2% increase. Until a month ago, the figure stood at a 1.3% increase in the month, this is in the largest month-to-month decrease in 70 years.

In an annual perspective, this is an inflation rate of 8.5%, below the expectation of 8.7% in the US. The monthly core index (excluding energy and food) rose by 0.3%, below the expectation of 0.5%, this is an annual rate of 5.9%, compared to expectations to 6.1%.

Yonatan Katz, chief economist at Leader Capital Markets, specifically referred to the core index of inflation – “Although inflation in the US rose slightly less than expected, core inflation rose by 5.9% a year ago, similar to the previous month (the market expected a 6% increase). There is a sharp increase in food prices and rental prices. The inflation environment is still high and far from the Fed’s target, so the monetary tightening trend will continue, even against a relatively strong macroeconomic environment (according to the latest employment data and other indicators). The Fed is expected to raise the interest rate in the upcoming interest rate decision by 0.5% and continue to raise the interest rate beyond 4% at the beginning of 2023.”

Yoni Penning, Markets Economist at Mizrachi Tefahot – “Looking ahead, the continued significant price drops, especially in the energy markets, will have a negative effect on inflation in the August index as well. And apparently the strengthening of the dollar in the world in recent months has not yet fully manifested itself in inflation. Housing costs, on the other hand, are expected to support the future indices, against the background of the improvement in the employment market, and the exit from the corona. In the latest interest rate announcement, at the end of July, Fed Chairman Powell already indicated that the bank will slow down the pace of its interest rate hikes at some point and went on to emphasize that the pace of hikes will depend on the data. In this sense, We estimate that the Fed will have to adopt less hawkish language in the upcoming interest rate decision. and refer, to a certain extent, to the possibility of ending the course of interest rate increases.

The chief economist of Bank Leumi, Gil Befman – “During the last 12 months, the overall index rose by 8.5%.” The gasoline component decreased by 7.7% in July and was offset by an increase in the food and housing components. The entire energy index fell 4.6% during the month with the gasoline and natural gas indices falling, but with the electricity price index rising. The food component continued to rise, by about 1.1% during the month. The core index rose 0.3% in July, a smaller increase than in April, May, or June. The interest rate is expected to continue to rise to a level of about 3.5% at the end of 2022 compared to about 2.5% now.’

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