Consumer prices up 0.1% in September

Israeli interest rate lower than that of the US for the first time in history.

Israel's Consumer Price Index rose 0.1 percent in September, as prices rose on fruits and vegetables, housing maintenance, food products, and transportation and communications, the Central Bureau of Statistics said Friday. Not including fruit and vegetables, prices actually sank 0.1%, but the CPI rose 0.2% when housing prices were ignored. The overall CPI rose 0.2% in August, after an unexpected 1.1% surge in July. Over the past twelve months, the general CPI has risen 1.9%; the index showed a 1.8% rise when fruit and vegetable prices were excluded, and 2.4% when housing prices were excluded. In any event, the rises match the Bank of Israel's “price stability” target of 1% to 3% inflation for the year. In September, fruit and vegetable prices rose 4.4%, as the prices on fresh vegetables alone surged 12.5%. General food prices rose 0.6%, as the prices of meat, poultry, and fish products gained 2.4% but wine was 2.8% less expensive than in August. Housing maintenance costs rose 1.2%, led by prices on bedding and home decoration items, which gained 4%, while transportation and communications costs grew 0.4% as the price of fuel rose 4.9%. Last month's inflation was largely tempered by drops in clothing and footwear prices (down 5.2%), a 1.4% drop in the cost of educational, cultural and entertainment consumption, and a 0.3% drop in housing prices. The average bill paid for a stay at a hotel or to pamper oneself at a spa sank 17.8% in September, following a 14% surge in August. At the end of September, Bank of Israel Governor Stanley Fischer raised the shekel interest rate for October by one quarter of a percentage point to 3.75%, bringing an end to eight straight months at record-low 3.5%, in order to keep inflation within the price stability target. The move also put the shekel rate back on par with the dollar rate, which had been raised to 3.75%, bringing the Israeli interest rate lower than that of the US for the first time in history. Following news of the September CPI Friday, the Israel Manufacturers Association urged the central bank to keep the interest rate low to help foster economic growth, citing expectations that the 2005 inflation target will indeed be met. Fischer is set to announce the November interest rate on October 24.