JERUSALEM (Reuters) – Israel’s inflation rate surged in August to its highest rate in nearly a year, data from the Central Bureau of Statistics showed on Sunday, reducing the likelihood of more interest rate cuts anytime soon.
The annual inflation rate rose to 3.6% last month from 3.2% in July, its highest level since last October. It was well above expectations of 3.2% in a Reuters poll and far exceeds the government’s 1-3% annual target range.
Government officials have largely blamed war-related supply issues for the spike in inflation.
The consumer price index rose by a higher than expected 0.9% in August from July, bolstered by higher costs of fresh produce, food, housing, transport, education and entertainment. These were only partly offset by declines in clothing and footwear, telecoms and furniture.
After cutting its benchmark interest rate in January, the Bank of Israel has left the rate unchanged at subsequent meetings in February, April, May, July and August, citing geopolitical tensions, rising price pressures and looser fiscal policy due to Israel’s war with the Palestinian militant group Hamas.
It next decides on rates on Oct. 9. Israeli central bankers have said they do not expect rate cuts until 2025.