Inflation accelerates to year-high of 3.8%

Inflation accelerates to

Israeli inflation accelerated to 3.8 percent in November, breaching the government's target rate for the first time in three months, as increases in taxes helped push up prices. The inflation rate compares with 2.9% the previous month, the Jerusalem-based Central Bureau of Statistics said today. The median forecast of 10 economists surveyed by Bloomberg was 3.7%. In the month, prices rose 0.3%. "The Bank of Israel has already decided that it will raise interest rates every second or third month," Vered Dar, chief economist at Psagot Investment House Ltd. in Tel Aviv said in a telephone interview prior to the announcement. "If the index is in line with the consensus, it won't tip the scales either way, and other parameters will become more important in deciding whether to raise rates this month or wait for a month." Bank of Israel Governor Stanley Fischer increased the benchmark interest rate by a quarter of a percentage point to 1% in November after raising it by the same amount in August as the economy returned to growth. Increases in value-added-tax and taxes on fuel and water have added about 1.2% to the inflation rate, the bank said. Israel government bonds closed at their lowest level in two months ahead of the report with the yield on the benchmark Mimshal Shiklit note due February 2017 rising four basis points to 4.77%, the highest since Sept. 9. Forecasters surveyed by the central bank said they expect inflation to slow to within the government's target range of 1% to 3% toward the middle of next year, the bank said in its November 23 minutes. Gross domestic product expanded an annualized 2.2% in the third quarter, its quickest pace in more than a year, led by technology exports and investments, the statistics bureau said on November 16. In 2010, economic expansion may be faster than the central bank's 2.5% forecast, Fischer said on December 3. Israel's benchmark TA-25 index has gained 70% since the beginning of the year, with shares in Teva Pharmaceutical Industries Ltd., the country's largest company by market value and the largest maker of generic drugs in the world, rising 26%. (Bloomberg)