CPI declines 0.1% in November

The Consumer Price Index fell 0.1 percent in November, led by a 2.7% drop in transportation and communication prices, as fuel prices sank 8.6%, the Central Bureau of Statistics said Thursday. The effect of the drop in fuel prices was largely offset, however, by rises in all other categories. In the past twelve months, the overall CPI has risen 2.7% - approaching the ceiling of the Bank of Israel's 1% to 3% "price stability" target for total inflation for the year - with the bulk of inflation occurring in July (1.1%) and October (0.8%). November's negative inflation overall was "somewhat surprising," said Prof. Rafi Melnick, dean of the Lauder School of Government at the Interdisciplinary Center in Herzliya and formerly of the Bank of Israel, who attributed it to a stronger than expected effect of the drop in fuel prices, alongside the weakening dollar. Mortgage holders - and all others with CPI-indexed loans - "can breathe a little easier," he said. November's slight dip tempers October's 0.8% spike, he added as he forecast calmer inflation - between 1% and 2% in total - over the next 12 months. Excluding fruits and vegetables, the CPI grew 2.6% over the past year. Without housing, prices have risen only 2.3%. Clothing and footwear prices rose 3.7% in November, and fruits and vegetables became 2.1% more expensive, as the price of fresh vegetables alone rose nearly 5%. Other food prices rose 0.8% - led by a 4.4% rise in the price of bread and a 3.6% rise in the price of beef. Housing prices rose 1.3%, while the cost of travel - also linked to fuel costs - fell 3.7%. "I do not identify inflationary pressures in the Israeli economy like those we have known in the past," Melnick said, adding that "The good news is that we are apparently within the government's inflation target, which I hope will be a signal that will help reduce the pressure on the Bank of Israel to raise the interest rate." At the end of November, Bank of Israel Governor Stanley Fischer raised the shekel interest rate by one half of a percentage point to 4.5%, in anticipation of Tuesday's 0.25 point raise by the US Federal Reserve. "So [Fischer] has some leeway, and can wait another month before raising it again," commented Melnick. In any event, he said, it appears that the Fed has reached the end of the current cycle of rate raising. "So I would advise the Bank [of Israel] not to raise the interest rate [for January]," he said. Federation of Israeli Chambers of Commerce President Uriel Lynn concurred. He argued that "market trends - of a strengthening shekel rate against the dollar and a lack of motion in the CPI for November - clearly show that at this stage there is no place for further raises in the interest rate." Raising the rate in the current situation would likely hamper the economy's growth, he said.