Israel’s inflation jumps more than expected as war continues
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Month-on-month inflation quickened from 0.6 per cent to 0.9 per cent, the highest reading in more than two years.
PHOTO: AFP
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Israel’s inflation accelerated more than expected in August, to 3.6 per cent year on year, as the war in Gaza strains the economy and the government’s spending soars.
The figure rose from 3.2 per cent in July, the Israeli Central Bureau of Statistics said on Sept 15, and is now significantly above the country’s official inflation target of between 1 per cent and 3 per cent. Analysts were forecasting that the rate would remain steady, according to a Bloomberg survey.
Month-on-month inflation quickened from 0.6 per cent to 0.9 per cent, the highest reading in more than two years. Survey respondents expected a dip to 0.5 per cent.
Prices for travelling abroad and vegetables were among those that rose the most. Many foreign airlines have stopped flying to Israel on security grounds, while fewer ships are calling at the key Israeli port of Eilat because of Houthi attacks in the Red Sea. The construction and agriculture sectors have been hit by a shortage of Palestinian workers, who are no longer allowed into Israel from the West Bank and Gaza.
Foreign travel prices surged more than 22 per cent in August, while tomatoes cost 37 per cent more.
Adding to the pressures is the government’s increased spending to fund the conflict against Hamas in Gaza and cope with skirmishes between Israeli forces and Hezbollah, a militant group based in Lebanon.
The central bank has regularly voiced its concern about the impact of the Gaza war on inflation in recent months. Despite the economy weakening, the bank’s deputy governor told Bloomberg in late August that interest rate cuts were probably off the table until 2025.
That will be the case, according to deputy governor Andrew Abir, even if the US Federal Reserve lowers rates on Sept 18, as most analysts expect it will.
“Inflation’s become unusually high even from a historical point of view,” said strategist Yonie Fanning from Mizrahi Tefahot Bank.
“The effects of the war on the economy in general and the price index in particular continue to be prominent.” BLOOMBERG
