April CPI in line with expectations; strong shekel supports low inflation environment and rate-cut expectations

ISRAEL - In Brief 18 May 2026 by Sani Ziv
Israel’s CPI rose by 1.2% in April, in line with our expectations. Annual inflation remained around 1.9%, similar to the previous month. Overall, the CPI did not surprise, and the entire increase was driven by higher fuel prices (12.7%) and seasonal components, including prices of airfare (27.9%), fresh fruit (7.8%), domestic vacations (16.4%), and clothing and footwear (2.4%). It is important to note that Israel’s CPI is not seasonally adjusted, making April traditionally a strong-inflation month. Excluding seasonal components, the CPI was broadly unchanged, while housing prices increased only moderately (0.1%). Food prices remained unchanged. As shown in the chart below, tradable inflation edged up slightly to 0.2% y/y, from 0.1% previously, while non-tradable inflation increased modestly to 2.9%, still below the 3% level. Overall, both tradable and non-tradable inflation continue to trend lower despite the war and higher energy costs. The relatively low inflation environment is supported by the sharp appreciation of the shekel against the dollar (8.4% YTD and 17.8% YoY). GRAPH 1Tradable and non-tradable CPI continue to moderate despite the war 12-month rate of changeSource: Bank of Israel.A notable development in the April CPI was the relatively moderate increase in housing prices. The owner-occupied housing services index declined by 0.1% compared with March 2026 and rose by only 2.9% over the past 12 months. Rental prices in renewed contracts increased by 2.6%, while rents in tenant-replacement contracts rose by 3.6%, down sharply from 5.9% in the previous month. This may partly reflect the impact of the war month and weaker demand for apartments in Tel Aviv durin...

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