Bloomberg News

Israel Inflation Probably Slowed in January as Growth Weakens

February 15, 2012

Feb. 15 (Bloomberg) -- Israeli inflation probably eased in January to its slowest pace in almost a year and a half as global and domestic growth weakened.

The inflation rate declined to an annual 1.9 percent from 2.2 percent the previous month, according to the median estimate of 12 economists surveyed by Bloomberg. Prices probably fell 0.2 percent in the month after remaining unchanged in December, according to the survey. The Jerusalem-based Central Bureau of Statistics will release the data at 6:30 p.m. local time today.

“We’re seeing a softening of inflationary pressure,” Jonathan Katz, a Jerusalem-based economist for HSBC Holdings Plc, said in a telephone interview. “Growth is a little bit weaker, consumers are more cautious, so there is less demand pressure.”

Growth is expected to slow to “a little less” than 3 percent this year, the International Monetary Fund said Feb. 13, lowering its forecast from a September prediction of 3.6 percent. In 2011, the economy expanded 4.8 percent. The Bank of Israel lowered its benchmark interest rate by a quarter-point last month to 2.5 percent, the third cut in five months, saying that the European debt crisis remains a threat to growth.

The central bank has “plenty of room” to reduce interest rates if necessary, Governor Stanley Fischer said on Feb. 1.

“Inflation is on track to fall toward and even beyond the mid-point of the inflation target range -- with commodity prices, domestic demand and the housing market all softening,” the IMF said in a Feb. 13 report on the Israeli economy.

The government’s target is 1 percent to 3 percent. Economists’ 12-month inflation expectations were unchanged at 2.3 percent for a second month, the central bank said Jan. 17.

Protests against the high cost of living that spread through the country last year have helped moderate several components of the CPI, including food and housing prices, the Bank of Israel said in a report this week.

--Editors: Louis Meixler, Ben Holland, Karl Maier.

To contact the reporter on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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