The July inflation figure is a complete surprise, with analysts' projections way off the mark. The Consumer Price Index (CPI) rose 1.1% last month, double the estimates. This means that inflation over the twelve months to July was 4.8%, similar to the rate in the twelve months to June. Since the beginning of 2008, the CPI has risen 3.5%.
The rate of inflation is currently 1.8% above the government's target range.
Eight main items in the CPI rose sharply, prominent among them being : housing, home maintenance, public transport, cultural and entertainment services, fresh fruit and vegetables. Banking service prices rose 16.2% following the reform in bank charges.
The exchange rates for both the dollar and the euro against the shekel fell after the CPI figure was announced.
Given the current inflation rate, it appears that Governor of the Bank of Israel Stanley Fischer acted on the basis of inflationary developments in the economy when he raised the central bank's key rate by 0.25% to 4%, against the view of the majority on the monetary forum, which was in favor of leaving the rate unchanged.
Published by Globes [online], Israel business news - www.globes.co.il - on August 15, 2008
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