By Steven Scheer
JERUSALEM (Reuters) -Israeli price pressures cooled further in September, with the annual inflation rate hitting a seven-month low of 2.5%, which combined with the end of the war in Gaza may convince policymakers to reduce interest rates soon.
The rate, data from the Central Bureau of Statistics showed, slowed from 2.9% in August. It had been as high as 3.8% in January.
The September rate was below expectations of 2.9% in a Reuters poll and was well within the government’s 1%-3% annual target range.
Despite pressure from lawmakers and industrialists to give some relief, the Bank of Israel has taken a cautious approach on rates, arguing the two-year Gaza war helped to underpin inflation due to supply constraints along with an expansionary budget to help fund the conflict.
But a U.S.-brokered deal ended the war this week and brought the remaining 20 living hostages held by Hamas militants in Gaza back to Israel. Hamas still needs to deliver 21 more dead captives under the deal.
Ron Tomer, head of Israel’s Manufacturers’ Association, called on the central bank to lower rates, saying there was no longer justification for wide rates gaps with other countries.
“Now that inflation has been curbed and exporters are facing a global market full of uncertainty and canceled orders, we must ensure that monetary policy does not deepen the damage to the economy’s main growth engine – and therefore, exporters must be supported,” he said, also pointing to a strong shekel.
The Israeli currency last week hit a three-year high versus the dollar and has gained 10% versus the greenback so far in 2025 while the Fed has trimmed U.S. rates.
The shekel was up 0.6% to 3.29 per dollar on Wednesday.
Consumer prices fell 0.6% in September from August, led by declines in costs of fresh fruit and lower airfares in Israel and abroad.
The Bank of Israel’s monetary policy committee, which on September 29 voted 6-0 to keep its benchmark rate at 4.5%, next decides on November 24.
Israeli media had earlier reported the central bank may move forward its meeting to lower rates but the Bank of Israel said while that is within its right, it is not being considered.
(Reporting by Steven Scheer; Editing by Gareth Jones and Chris Reese)
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