There was an annual increase of 5.3% in consumer prices in Israel in 2022, which was a rise of 2.8% from 2021, primarily due to increasing cost of transportation, food, communication and housing.
In December, the annual inflation rate had been 5.3%, as it continued to be at a 14-year high for the second month in a row.
This put the Bank of Israel under more pressure to increase interest rates in the following month again for taming prices.
The CPI
The month of December saw a 0.3% increase in the consumer price index (CPI) from the month of November, which is an inflation measure tracking the average price of household goods.
Meanwhile, analysts had also been expecting an increase of 0.3% to 0.4%. According to the Central Bureau of Statistics, the 5.3% annual CPI was the highest since October 2008 when it had climbed to 5.5%.
The month of December saw the cost of transportation rise dramatically by 1.1% and there was also a 0.6% increase in both medical services and housing and 0.2% in apartment maintenance.
Meanwhile, there was a 2.8% decline in prices of fresh fruits and vegetables, 1.4% in culture and entertainment and 1% in clothing and footwear.
The comparison
There had been a 9.2% increase in communication and transportation prices in 2022, while 6.3% gains had been recorded in housing, 5.7% in apartment maintenance and 4.9% in food prices.
The statistics bureau disclosed that since 2017, there has been an aggregate 9% increase in consumer prices.
Nonetheless, inflation in Israel remains significantly lower as opposed to other developed countries. There was a 0.1% decline in consumer prices from November to December in the United States.
This is the first decline seen in 2.5 years, as there was a drop in gas prices. There was a deceleration in inflation by 6.5% in December on an annual basis, as compared to a year ago.
It had stood at 7.1% in November and adds to signs that the pace of interest rate hikes by the US Federal Reserve will slow down in the coming months.
Interest rate hikes
Earlier this month, the central bank in Israel had increased interest rates for the seventh time in a row, as it increased its lending rate by 50 basis points to take it to 3.75%.
This was another attempt to tame rising prices. The Israeli central bank is aiming to bring down inflation into the target range of the government between 1% and 3%.
Amir Yaron, the governor of the Bank of Israel, said that the next two months will continue to see inflation pressure before it begins to ease gradually.
However, this is expected to happen a tad slower than previously expected. In the coming year, economists of the central bank believe that inflation will ease to 3%.
Previously, the forecast had indicated that inflation would reduce to 2.5% this year and 2% in 2024. In 2023, the pace of economic growth is expected to be around 2.8%, while an October forecast had put it at 3%.