The Bank of Israel was not encouraged by today’s inflation data. After a two-month lull, prices are rising again and inflation rose to an annual rate of 5.1%, compared to 4.6% the previous month. Some economists explain that in fact there was no slowdown at all in recent months – and that the whole reason for the decline in the index was the holidays. So now the holidays are behind us – and inflation is rising again.
The big question is how this will affect the Bank of Israel and how much it will raise the interest rate this coming Monday, November 21st. As a reminder, the interest rate in Israel is now at 2.75% after the interest rate increase in August (compared to 0.1% only at the beginning of the year), but the accelerated interest rate increase has not yet succeeded in stopping inflation. True, the situation here is good compared to 8-9% in the western world, and even more in some countries, but that does not mean that in Israel we also want to see inflation that runs rampant at such a rate.
The Bank of Israel, led by Prof. Amir Yaron, hoped to see inflation curbed, which would allow them to raise interest rates at a slower pace. But it doesn’t happen. In September, the index rose by 0.2%, showing an annual rate of 4.6% – the same as the month before, when it was a decrease compared to 5.2%. Now inflation in Israel is almost back to this number.
Mizrahi and Migdal expect a 0.5% increase in interest
Yoni Penning, chief strategist for new transactions, Bank Mizrahi Tefahot, says that there is actually nothing new, and that these are only changes due to the calendar: “The temporary decrease we experienced in inflation, and the increase today, do not represent the trend in our opinion, but calendar gaps due to the leap year, since The publication of the September index, and until the publication of the index today, the Tishri holiday period was largely absent from the annual inflation.
He believes that the situation is now improving: “The external effects on the Israeli economy continue to be deflationary for the most part. Chief among them is the strengthening of the shekel, the continued decline in global transportation prices, the decline in coal prices, and the stability in the prices of a variety of other goods. The expectation of the consequences of the fiscal policy of the emerging government, the abolition of taxes on products on the one hand, and an increase in government spending on the other.
If you want to specialize in the capital market and have a big head and motivation, you can be a good fit for us.
The job can be part-time; flexibility in working hours; Work from home too.
Preference (not mandatory) for writing experience and basic familiarity with the capital market.
Leave details and we will get back to you
Thank you for leaving details, we will try to get back to you as soon as possible
“The good news is that in every figure that will be published in the coming months, we will have the effects of those from the annual inflation data. Furthermore, to the extent that the price drops that we were exposed to in the last index in the US will also be found in the CBS samples, it is likely that this will also contribute to the decrease in actual inflation for us, which will have an impact on The monetary policy.
So how much will the Bank of Israel raise the interest rate next week?
Penning: “Market expectations for the Bank of Israel interest rate, which will be published next week, have fluctuated in recent days around a 0.5% increase, to 3.25%. After the publication of the weaker than expected price index in the US, and the upward creep of local unemployment, a slight weakness in this expectation was evident. However, in light of today’s strong figure and the local inflationary uncertainty, we still prefer the scenario in which the Bank of Israel chooses to end the year at a level of 3.25%.”
So do observers at Migdal Capital Markets: “The price index that continues to rise is expected to lead to the continuation of the bank’s aggressive monetary policy and we estimate a 0.5% increase in the Bank of Israel interest rate next week to a level of 3.25%.”
Psagot: “The interest rate will rise by 0.75%. Inflation will rise further, housing prices will fall next year”
in less optimistic peaks. According to Guy Beit-Or, the chief economist: “Core inflation has accelerated, service inflation continues to be high and unlike what we see in the US, the annual rate of inflation here has not yet reached its peak. When we take these data into account, together with the latest evidence of further acceleration in wages in the Israeli economy, and this together with the fact that the US, the UK and the Eurozone raised interest rates by 75 basis points in November – the October index reinforces our assessment that the Bank of Israel will raise He also raised the interest rate by another 75 basis points next week.
“In our opinion, the process of food price increases in Israel has not yet reached its limit – although the level of food prices in Israel is high compared to the rest of the world, when food prices in the US and Europe are rising at a rate of 13-14%, we estimate that it will be difficult for the marketing chains in Israel to withstand the pressure The price increases that are coming and are expected to continue on the part of the manufacturers and importers.
“The apartment prices have not yet started to cool down according to the latest data, but we note in advance that these are prices that were correct for the August-September period. We emphasize that in the current data on taking out mortgages and the volume of transactions, a significant decrease in activity is evident and therefore it is only a matter of time until the price increases The apartments will stop and next year we estimate that we will even begin to see a drop in prices in the Israeli housing market. However, the effect on the consumer price index is significantly lagging behind the price and sales data, so we will continue to see upward pressure from the housing section of the index during the coming months as well.”
President of the Union of Chambers of Commerce: “The government is responsible for the cost of living”
Uriel Lin, president of the Association of Chambers of Commerce, attacks the government: “The index is further proof that the main responsibility for the increase in the cost of living is the Israeli government itself. The increase in the cost of living must not be examined only through the prism of the increase in product prices. We also need to understand what all the data that affects the sector’s costs are And apart from the very fact that imports from abroad are becoming more expensive and so are sea freight rates, we must examine the effect of the government’s actions on the cost of living. We still have a burdensome tax system and high taxation on the import of food products and the import of agricultural crops, as well as particularly high taxation on vehicles and taxation on real estate investments.
“The tax system itself is an accelerator of price increases – when food prices go up, the value added tax goes up. When vehicles become more expensive, the purchase tax goes up. When sea freight rates soar, the state imposes import taxes on the price increases, the local authorities – in addition to raising the property tax – ask for extraordinary increases instead of efficiency. Interest costs also increase the costs of the business sector. Wages are rising, due to changes in the market and not necessarily due to the validity of employment agreements. The Israeli government must roll up its sleeves and stop taking the easy way out.”