Feb. 15 (Bloomberg) -- Israeli inflation probably eased to its slowest pace in 14 months in January as prices for energy, vehicles, travel and apparel declined.

The inflation rate fell to 3.3 percent from 3.8 percent in December, according to the median estimate of 10 economists surveyed by Bloomberg. The Jerusalem-based Central Bureau of Statistics will report the data at 6:30 p.m. today.

“The main factor until now has been lower energy prices, but as the labor market starts to get worse we’ll start seeing declines in the food and housing categories,” said Yaniv Hevron, an economist at Psagot Investment House Ltd. “The Bank of Israel will probably lower the base rate between 0.5 to 0.75 percentage point this month.”

Inflation has been easing from a peak of 5.5 percent in September and October, enabling the Bank of Israel to lower its benchmark lending rate by 3.25 percentage points over the past four months to a record low of 1 percent.

The inflation rate will probably fall below the government’s target range of 1 percent to 3 percent this year as economic growth slows and global energy prices fall, the Bank of Israel said Jan. 26, citing its survey of forecasters. It will return to the range in 2010, according to the poll.

The central bank probably will lower the rate a further half point at its next policy meeting on Feb. 23, according to eight economists surveyed by Bloomberg. Two of the eight see the rate dropping to 0.25 percent.

Last Week

Last week, the benchmark 6.5 percent Shahar bond due in January 2016 dropped 0.7 percent, with the yield climbing 14 basis points to 4.24 percent. The shekel weakened 0.4 percent as of Feb. 12 to 4.0624 per dollar from 4.0460 a week earlier.

The Tel Aviv Stock Exchange’s benchmark TA-25 Index advanced 0.8 percent to 687.64. Nice Systems Ltd., a maker of digital recording systems for call centers, led the gainers, adding 12.5 percent, while Makhteshim Agan Industries Ltd., the world’s biggest maker of generic agrochemicals, followed with a 7.1 percent rise.

The Kadima Party, led by Foreign Minister Tzipi Livni, won 28 out of 120 parliamentary seats in general elections Feb. 10, one more than the Benjamin Netanyahu’s Likud Party, its biggest rival. President Shimon Peres will tap one of them as early as this week to form a coalition.

The following is a list of important events in Israel next week:

Event                                   Date
January consumer price index            Feb. 15
January purchasing managers index       Feb. 16
November Bank of Israel CPI survey      Feb. 16
Teva Pharmaceutical Industries          Feb. 17
 fourth-quarter results

To contact the reporter on this story: David Rosenberg in Jerusalem at drosenberg1@bloomberg.net

Last Updated: February 14, 2009 17:00 EST