Inflation decreased in Israel

Contrary to earlier predictions that prices would rise due to the war with Hamas, inflation in Israel slowed for the second month in a row.

According to inflation data released on Wednesday, inflation in Israel rose 3.7 percent annually and 0.5 percent monthly in October. In September, inflation was announced to be 3.8 percent annually.

The slowdown in increases in rental housing prices and the significant decline in consumer demand, especially in culture and entertainment, influenced the fall in inflation.

Although inflation has slowed, it remains above the official target range of 1 to 3 percent.

THE ENTERTAINMENT AND TOURISM SECTORS WERE THE MOST AFFECTED

Although the war affected the entertainment and tourism sectors the most, the call-up of more than 300,000 reserve soldiers caused labor shortages in some sectors. In the fifth week of conflict, credit card spending fell more than 20 percent compared to an average week in 2023.

Barclays economists said in a report on the Israeli economy: “Unlike previous crisis periods in which the Israeli economy showed strong recoveries, we expect a more gradual recovery, as some sectors will take longer to recover due to the impact of the security issues”.

FORM LOSSES HAVE BEEN RECORDED

Although the Israeli currency, the shekel, weakened greatly in the first three weeks of the war, it has since recovered and is stronger than before the war began on October 7, helped greatly by the sale of reserves. by the central bank to support the economy.

Due to the volatile outlook, the Bank of Israel is keeping interest rates stable by focusing on supporting the shekel and stabilizing markets, while Barclays expects the interest rate to remain constant at the last interest rate meeting in November this year. anus. A reduction of a quarter point is expected in January.

“Labor shortages could offset disinflationary pressures from lower demand and limit the scope for a deeper easing cycle,” Barclays economists said.

A survey by the Central Statistics Office in October predicted that the war would have a strong deflationary effect over time. Tel Aviv-based Leader Capital Markets recently lowered its one-year inflation forecast to 2.6 percent.