Israeli inflation eased in February to its slowest in over four years as economic growth moderated and the impact of social protests kept prices down.
Inflation slowed to 1.7 percent from 2 percent the previous month, the Jerusalem-based Central Bureau of Statistics said today. That matched the median estimate of a Bloomberg survey of 11 economists. Prices were unchanged for a third month.
“It’s the effect of the social protests which very much put the brakes on prices,” Victor Bahar, deputy manager of Bank Hapoalim Ltd.’s economics department, said in a telephone interview prior to the announcement. “Inflation has also been affected a bit by slowing growth.”
Growth (ISGSANYY) is expected to ease 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 4.7 percent. The Bank of Israel, led by Governor Stanley Fischer, has lowered its benchmark interest rate three times since September, bringing it to 2.5 percent.
Protests against the high cost of living that spread through the country last year have helped moderate several components of the consumer price index, including food and housing prices, the Bank of Israel said in a February report.
The demonstrations in June and July prompted closely-held Tnuva Industries Agricultural Co-Op In Israel Ltd. to cut its recommended selling prices by as much as 15 percent. Strauss Group Ltd. followed with reductions of 12 percent on some of its milk products.
During February, gasoline and fresh fruit prices rose, while internet service and car prices declined, the bureau said.
Forecasters are expecting inflation to accelerate in coming months. Economists’ 12-month inflation expectations rose to 2.4 percent from 2.2 percent the previous month, the central bank said Feb. 19. The government’s target is 1 percent to 3 percent.
“We’re looking at a rise in energy prices,” Bahar said. “This is due both to the increase in global oil prices, as well as the increase in electricity costs due to the halting of the gas flow from Egypt. The fuels used instead are much, much more expensive and the cost is transferred to consumers.”
Natural gas imports from Egypt have been repeatedly stopped due to attacks against the pipeline through the Sinai desert.
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