The Consumer Price Index (CPI) for March, due to be released at 18:30 this evening by the Central Bureau of Statistics, is expected to show a rise of 0.3-0.4%, according to a majority of analysts.
Ayalon Investment House chief strategist Yaniv Pagot estimates that the index rose 0.2% in March, mainly because of the rise in food prices and the upward creep of rents. Taxi fares, representing 0.031% of the index, rose 6% in the last third of the month in 6%, and will affect the CPI for March and April. The rise in the price of cable television and telecommunications company Hot's basic package and the rise in prices of Internet and telephony infrastructure will also contribute to the monthly increase in the index . Winter fashions will complete their seasonal price reductions and will offset some of these rises.
"Given the market's high inflation expectations in, a series of positive CPI readings to come in the next few months, and the Bank of Israel's cautious optimism about developments in the European crisis, optimism that led the bank to raise its domestic growth outlook, the process of interest rate reductions can be expected to enter the freezer for several months. We believe that if the European debt crisis relapses into substantial deterioration, which we think is highly likely, the central bank will be forced to abandon the war on inflation, the focus again on encouraging local growth and exports," Pagot says.
The CPI is expected to rise much more sharply in April, by about 1%, due to increases in fuel prices, electricity, taxi fares, housing and some food products (prices of some fresh fruits jump in April each year before falling during the summer).
Inflation over the next twelve months is expected to reach the rather high rate of 2.8%. This is still within the government's target range of 1-3%.
Most macro analysts expect the Bank of Israel to leave its interest rate unchanged in the next two months, at 2.5%.
Published by Globes [online], Israel business news - www.globes-online.com - on April 15, 2012
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