Israeli inflation probably eased in September as food costs declined following consumer protests and end-of-summer sales brought down apparel prices.
Annual inflation slowed to 3.2 percent from 3.4 percent, according to the median estimate of 17 economists surveyed by Bloomberg. The consumer price index remained unchanged from the previous month, according to the survey. The Jerusalem-based Central Bureau of Statistics is scheduled to release the data at 2 p.m. local time on Oct. 14.
“Inflation has come down a lot,” David Petitcolin, an emerging-markets analyst at Royal Bank of Scotland Group Plc in London, said by telephone. “There is a favorable base effect since commodity prices increased sharply last year. The global crisis has helped to lower prices and in Israel we’ve had the social unrest, which is spurring companies to bring down prices.”
Bank of Israel Governor Stanley Fischer, who had been raising rates for more than two years to battle inflation, reversed policy on Sept. 26 and cut the key rate by a quarter percentage point to 3 percent, citing the worsening global economic outlook. The change came as expectations for inflation, which have exceeded the 1 percent to 3 percent target range every month this year, fall.
Economists’ 12-month inflation expectation declined to 2.3 percent from 2.7 percent a month earlier, the central bank reported Sept. 20, the lowest since February 2010. Two-year interest-rate swaps, an indicator of investor expectations for the benchmark rate over the period, were at 2.77, close to their lowest in a year.
Cost of Living
Prime Minister Benjamin Netanyahu’s Cabinet approved a program on Oct. 9 that aims to ease the cost of living after rallies brought hundreds of thousands of protesters onto the streets.
The demonstrations and boycotts, which started in June over the cost of cottage cheese, prodded Tnuva Food Industries Agricultural Co-Op In Israel Ltd., which controls about 70 percent of the dairy market, to cut recommended selling prices by as much as 15 percent last week. Competitor Strauss Group Ltd. followed with reductions of 12 percent on some of its milk products.
The Bank of Israel cut its forecast for economic growth this year and next on Sept. 22, citing increased uncertainty about the global economy and a decline in the rate of growth in world trade. The economy will expand 4.7 percent in 2011 and 3.2 percent in 2012, the central bank said, lowering its forecasts from 4.8 percent and 3.9 percent.
The central bureau of statistics said today that the economy is expected to expand 4.9 percent this year.