Israel: Inflation holds stable in December
Inflation came in at 5.3% in December, unchanged from Novembers figure but well above the Central Banks 1.0–3.0% target range. Looking at the details of the release, prices for food grew at a more moderate rate in December, while prices for transportation and communication grew at a faster pace.
Annual average inflation edged up to 4.4% in December (November: 4.2%). Meanwhile, core inflation fell to 5.0% in December, from the previous month’s 5.3%.
Lastly, consumer prices rose 0.28% in December over the previous month, after the 0.09% increase seen in November.
Recent inflation has been driven by high commodity prices, shekel depreciation and wage pressures. That said, inflation remains mild relative to other developed economies due to strong domestic gas production.
On the outlook and monetary policy implications, Goldman Sachs analysts said:
“We now estimate that headline inflation is at its peak and will gradually decline over the course of 2023. For monetary policy, we think that this implies that we are close to the peak in rates, and we maintain our forecast for an additional 25bp rate hike at the next meeting to a terminal rate of +4.00%. Beyond this, however, we think that rates are likely to remain at this level for a prolonged period of time, since while headline inflation is likely to ease, we think that core inflation will prove to be more sticky and will remain above the BoI’s target into 2024.”