August CPI preview: high monthly inflation of 0.6% is expected, but yearly inflation to fall below the upper bound of the target

ISRAEL - In Brief 14 Sep 2025 by Sani Ziv

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On Monday ((tomorrow), Israel will release the August CPI print, which we will be watching closely. We expect a 0.6% monthly increase, which would bring annual inflation down to around 2.8%, below the Bank of Israel’s 3% upper target range for the first time since September 2024. August has historically been a highly volatile CPI month, with an average increase of just 0.1% in recent years but with significant variation. In 2024, the index jumped 0.9%, mainly due to higher overseas travel costs, and a similar pattern may be observed this year as the CBS has adopted a more rigorous methodology that tends to push up summer readings. Seasonal factors are also at play in 2025, with expected increases in fruit and vegetable prices as well as in domestic vacation costs. Housing costs, particularly rent renewals, may add further upward pressure, as the summer months typically see greater household mobility. If we get a softer-than-expected reading, the case for a September rate cut strengthens. Conversely, an upside surprise may reinforce the central bank’s cautious stance. The Bank of Israel’s next policy meetings are set for September 29 and November 24. Geopolitical risks, including the recent attack on Hamas leaders in Qatar and the ongoing expanded war in Gaza, are also likely to weigh on the policy outlook. At the same time, stronger-than-expected fiscal data for August, a firm shekel, and very low inflation expectations may also shape the bank’s assessment.