The Client Value Index (CPI) studying for January launched by the Central Bureau of Statistics yesterday, a 0.3% fall, got here as a shock, with analysts having predicted a fall of simply 0.2%. The twelve-month inflation charge fell to 1.8%, the bottom since June 2021. We have a look at the merchandise that shocked all people, the explanation for the autumn, the much less excellent news lurking within the CPI figures, and the massive query: will the Financial institution of Israel minimize its rate of interest subsequent week?
1. The explanations for the sharp fall: Even when the analysts’ predictions had materialized and the CPI had fallen by solely 0.2%, annual inflation would nonetheless have dipped under 2% for the primary time in 4 and a half years. Why is that? Alongside the appreciation of the shekel, which tends to repress common inflation, one other variable comes into the image: the idea impact.
In easy phrases, this implies the truth that January 2025’s inflation drops out of the twelve-month calculation. The CPI studying for January 2025, an increase of 0.6%, was exceptionally excessive due to the rise within the charge of VAT which got here into drive that month. Now that it’s not included within the calculation, the typical is pulled downwards.
The optimistic information right here is that the twelve-month inflation charge shouldn’t be anticipated to rise above 2% within the coming yr.
2. The fickle merchandise and people who led the decline: The merchandise that confirmed the sharpest decline final month was flights abroad, which fell by 8.1%. Ever for the reason that Central Bureau of Statistics modified its methodology for calculating this merchandise, it has shocked upwards or downwards time after time, and moved the index as an entire, and this time was no exception. Financial institution Hapoalim chief markets strategist Modi Shafrir calculates that in greenback phrases costs of abroad flights fell by 14.1% in January, which compares with a median fall of 6% in January 2024 and January 2025. He says that the abroad journey merchandise by itself brough the final CPI down 0.37%.
Different objects that fell sharply final month have been motels and visitor homes in Israel (down 6.9%), clothes (down 4.5%), and automobile insurance coverage (down 1.5%).
3. The dangerous information – rents rose sharply: After moderating for months, the housing hire merchandise is accelerating. For the month, the hire merchandise truly fell by 0.2%, however it is a small decline for the season. For the yr to January, this merchandise rose by 3.8%. For brand new tenants, the state of affairs is worse: a year-on-year rise of 6%, the sharpest since October 2023.
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4. The excellent news: One encouraging merchandise is automobile insurance coverage, which fell by 7% within the twelve months to the tip of January. Within the background to that’s the demand by the Capital Market, Insurance coverage and Financial savings Authority that the insurance coverage firms ought to scale back the premiums they cost for complete and third-party insurance coverage. In November, the Capital Market, Insurance coverage and Financial savings commissioner gave the businesses an ultimatum to take action by the tip of this month. The present decline in premiums was, nevertheless, preceded by a pointy rise. Based on figures offered within the Knesset in December, complete automobile insurance coverage premiums rose by 60% within the interval 2022-2024.
5. The massive query – what is going to the Financial institution of Israel do? On Monday subsequent week the Financial institution of Israel is because of publish an rate of interest determination, and the market is questioning what it should do. Final time round, it sprang a giant shock with a second successive rate of interest minimize, bringing its charge right down to 4%. Based on the bottom situation printed by the central financial institution’s Analysis Division on the time of the earlier determination, the rate of interest will likely be minimize twice extra this yr, which means that it’ll attain 3.5% by the tip of it. The expectation on the capital market is of a a lot sharper decline, to three%.
So far as subsequent week is worried, opinion is split. Chief Capital Markets, for instance, says that “all in all, the low CPI studying in relation to expectations and the moderation of core inflation work in favor of an rate of interest minimize subsequent week.” Low cost Financial institution additionally believes that present situations are ripe for an extra minimize subsequent week. Harel Finance, alternatively, estimates that the Financial institution of Israel will wait this one out.
It’s value mentioning that one of the crucial vital elements within the Financial institution of Israel’s determination would be the shekel, which has appreciated significantly prior to now few months and is at its strongest in opposition to the US greenback for thirty years. The speed of appreciation has moderated considerably prior to now month, nevertheless, amongst different issues due to upsets on world markets. As we speak, the Central Bureau of Statistics will launch its preliminary estimate of GDP progress in 2025. Analysts count on a determine of three%.
Printed by Globes, Israel enterprise information – en.globes.co.il – on February 16, 2026.
© Copyright of Globes Writer Itonut (1983) Ltd., 2026.
