Israel’s inflation remained unchanged in September, defying most economists’ forecasts of a rise, as moderating growth kept it near the low end of the government target.
The annual inflation rate remained steady at 1.3 percent, the Jerusalem-based Central Bureau of Statistics reported today, below the median estimate of 1.5 percent in a Bloomberg survey of 12 economists. Consumer prices remained steady compared with the previous month. The government’s target range for annual inflation is 1 percent to 3 percent.
The Bank of Israel unexpectedly cut the benchmark interest rate last month by a quarter-point to 1 percent, its ninth reduction in two years, in a bid to boost the economy. Growth is forecast to slow to 3.4 percent in 2014, from 3.6 percent this year, the central bank said in September.
Rises in education fees, gasoline and fresh vegetables were offset by declining fruit prices and travel costs.
Inflation “isn’t likely to make economic headlines” in the coming months, Ofer Klein, head of economics and research at Harel Insurance & Financial Services, said before the data were released. Inflation over the next five months will probably total zero, Klein said. Prices are expected to increase 1.7-1.8 percent over the next 12 months, he forecast.
Rafi Gozlan, chief economist at I.B.I.-Israel Brokerage and Investments Ltd. in Tel Aviv, said inflation was being damped by slowing growth.
‘The projected moderation in the rate of economic growth in the coming year is expected to lead to a weakening in the labor market, especially if the pace of public employment growth is halted,’’ Gozlan said in an e-mailed report.
In addition to cutting rates, the central bank has also been buying dollars to cool the shekel and spur the export-driven economy. Inflation figures near the target floor “will allow the Bank of Israel to be more aggressive in foreign currency purchases, if the shekel continues to strengthen,” Klein said.
The central bank has said it would buy a total of at least $5.6 billion in 2013-14 and was prepared to purchase more.
The shekel has strengthened by about 8 percent against the dollar in the past 12 months, making it the best performer among 31 major currencies tracked by Bloomberg.
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