Israel’s inflation rose, extending a 15-year high reached in late 2022, despite the central bank’s longest cycle of increasing interest rates to combat the trend.
(Bloomberg) — Israel’s inflation rose, extending a 15-year high reached in late 2022, despite the central bank’s longest cycle of increasing interest rates to combat the trend.
Consumer prices climbed an annual 5.4% in January, compared with 5.3% the month before, according to figures released by the Central Bureau of Statistics on Wednesday. The median of economists’ forecasts in a Bloomberg survey was 5.2%.
Inflation has been above the official target range of 1%-3% for over a year, prompting the Bank of Israel to raise rates to their highest level since 2008 in its longest unbroken series of upward movements in decades.
Since the central bank’s last meeting at the start of the year, the political backlash against the government’s plans to reshape the judiciary has increasingly become a drag on sentiment, stoking a depreciation in the shekel that could make imports more expensive.
“With the exchange rate turning from a pull to a push factor for inflation, we think it will be much harder for the Bank of Israel to bring inflation back to its target,” Goldman Sachs Group Inc. economists including Clemens Grafe said in a report before the data release. “We therefore think that the ongoing weakness of the shekel also raises risks that the central bank will look to deliver a more hawkish message at the next MPC meeting.”
The central bank, which already started to raise borrowing costs in smaller increments from November, is set to announce its next decision on Monday.
–With assistance from Harumi Ichikura.
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