Government officials and analysts at investment houses predict that the Consumer Price Index (CPI) will rise by 0.6% in May, the highest increase for this month since 2002. The Central Bureau of Statistics will publish the May CPI at 6:30 pm today.
The CPI rose by 1.5% in April and by 0.3% in March, suggesting that the rise for the past three months could exceed 2.4%. Analysts also predict that the CPI will rise by a fairly high 0.5% in June.
Inflation in the first half of 2008 could reach 2.7%, reflecting an annualized rate of over 5.4% (inflation was zero in January and the CPI fell by 0.2% in February). This is the highest rate for seven years.
Nonetheless, there are Ministry of Finance and Bank of Israel economists who predict low inflation for both May and June. They predict that the May CPI will be less than projected because of the shekel's 5.7% depreciation against the dollar during that month. Prices for tomatoes and cucumbers as well as for some summer fruits also fell sharply. Given that tomatoes and cucumbers contributed 0.2% to the 1.5% rise in the CPI in April, falling prices for these items should affect the CPI in May. The economists believe that inflation is showing the first signs of breaking and that the CPI could even fall in summer.
Nevertheless, the Bank of Israel is expected to raise the interest rate for July to 3.75% because inflation for 2008 as a whole will reach 4%.
Published by Globes [online], Israel business news - www.globes-online.com - on June 15, 2008
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