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Israel inflation eases to 16-month low at 3.3%

Israel inflation Reuters/Ahmed Yosri
Israel's annual inflation rate dropped to 3.3 percent in July from 4.2 percent in June, its lowest rate since March 2022

The inflation rate in Israel eased to a 16-month month low of 3.3 percent in July from 4.2 percent in June, a drop that could continue to keep further Bank of Israel interest rate hikes at bay.

The consumer price index (CPI) rose 0.3 percent in July from June, led by gains in fresh produce, housing rentals, food and transportation costs.

Economists polled by Reuters had on average expected a 0.4 percent monthly rise and a 3.5 percent annual rate, which still remains above the government’s 1-3 percent target range.

The Bank of Israel is due to decide on interest rates on September 4. It left its benchmark interest rate at 4.75 percent in July after 10 straight increases that took the rate from 0.1 percent in April 2022.  

Earlier this month the Bank of Israel warned of risks to the stability of the banking system due to possible economic consequences from the government’s plan to overhaul the judiciary, as well as higher credit costs from a steep rise in interest rates.

In its semi-annual report on financial stability, the central bank said that Israel’s banks and insurance companies remain stable, citing the buffers built up by households and companies during the Covid-19 crisis that had increased their resilience to potential shocks.