Israeli Inflation Stays Below Target Mid-Point for Fourth Month

Israeli inflation remained below the mid-point of the central bank’s target range for a fourth month in January as growth moderated and the shekel appreciated.

The inflation rate fell to 1.5 percent from 1.6 percent the previous month, the Jerusalem-based Central Bureau of Statistics reported today. The median estimate of 11 economists surveyed by Bloomberg was 1.6 percent. The government’s target is 1 percent to 3 percent. In the month, consumer prices fell 0.2 percent.

“The economy is growing at a moderate pace, so there are no special inflation pressures,” said Ofer Klein, head of research at Harel Insurance & Financial Services Ltd. in Ramat Gan. “The appreciation of the shekel is also helping to moderate inflation.”

The Bank of Israel monetary policy committee, led by Governor Stanley Fischer, left the benchmark interest rate unchanged at 1.75 percent last month, after gradually reducing it from 3.25 percent in 2011 in an effort to shore up the economy amid the European debt crisis. Fischer said in a Feb. 13 press briefing that Israel doesn’t “have an inflation problem at the moment.”

Israeli growth slowed to 3.3 percent in 2012 from 4.6 percent the previous year, the Central Bureau of Statistics reported Dec. 31, based on preliminary figures. About 40 percent of Israel’s gross domestic product is made up of exports, with Europe one of the largest markets.

The shekel hit a 15-month high against the dollar on Feb. 1. Quantitative easing in the U.S., Europe and Japan supports the strengthening of the shekel, the Bank of Israel said in minutes of its last rate-setting meeting, released this week. The start of production from offshore natural gas reservoirs, expected this year, may also boost the currency.

Economists’ 12-month inflation expectations rose to 2 percent on average from 1.9 percent the previous month, the central bank said on Jan. 21.

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