Economy More rate hikes seen as Israel inflation eases to 5.2% By Reuters March 16, 2023 Reuters/Ronen Zvulun Bank of Israel governor Amir Yaron indicated more tightening was likely as long as inflation stayed high Israel’s inflation rate eased to a four-month low of 5.2 percent in February from a 2008 high of 5.4 percent in January. However, it was still higher than expected and is likely to mean another interest rate hike next month. The consumer price index (CPI) rose 0.5 percent in February from January, led by gains in fresh produce, housing rentals, food and transportation costs. Economists polled by Reuters had on average expected a 0.3 percent monthly rise and a five percent annual rate. February’s inflation rate was the lowest since October. The Bank of Israel is slated to decide on interest rates on April 3. The central bank has raised its benchmark rate sharply over the last year to 4.25 percent, from 0.1 percent last April, amid what it calls “sticky” inflation that has kept it above a government target of one to three percent. In an interview with CNN late on Tuesday, Bank of Israel governor Amir Yaron indicated more tightening was likely as long as inflation stayed high. “So we are determined, absolutely determined, to bring inflation back down to its target,” Yaron said. “And if that means continuing raising rates, and that is our primary tool, that’s what we will do.” He said that “it will take a little bit more pain, probably, in order to bring inflation back down to its target” and that he was not in favour of stopping monetary tightening now. “We know and there is experience in the past that if you stop too early, inflation can come back with a vengeance,” Yaron said. “And therefore I predict that at least around the world, we will see rates continue to go up and they will stay up for quite a bit.” Along with high inflation, Israel’s economy grew 6.4 percent in 2022 but is forecast to grow at around three percent in 2023.
