June inflation reading expected to be zero

The Central Bureau of Statistics will announce the CPI for June at 6:30 pm today.

The CPI was unchanged in May, and 12-month inflation was 1.6%, below the midpoint of the government's 1-3% inflation target. The CPI rose by 1.3% in January-May.

"The CPI for June is expected to be 0.1% higher compared with May. A modest 4-5% seasonal rise in prices for clothing and footwear, compared with previous years, combined with a projected 0.5% a month seasonal rise in housing rental prices during the summer will be the main factors contributing to higher prices in the CPI," said Ayalon Group chief economist Yaniv Pagot today.

"On the other hand, we believe that lower prices for communications and a 4% drop in prices of fruits and vegetables, as well as a 3% drop in fuel prices, will offset the rises in June. Right now, the chances of a surprise in the CPI is downward," Pagot concluded.

The low inflation rate supports interest rate cuts if the global crisis worsens. Last month, the Bank of Israel Monetary Committee decided to cut the interest rate for July to 2.25%, because of concerns about the worsening global economic environment.

Published by Globes [online], Israel business news - www.globes-online.com - on July 15, 2012

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