Inflation expectations move higher on planned price hikes and weaker shekel

ISRAEL - Report 17 Dec 2018 by Jonathan Katz

November's CPI (1.2% y/y) came in slightly lower than expected, and core inflation declined to 0.8% y/y. We see inflation reaching 1.3% in 2019 on a slightly weaker shekel and a steady increase in housing rentals. Although the CA surplus surprised on the upside (reaching 2% GDP in Q318), FX demand by Israeli institutions has accelerated significantly. We envision the next rate hike on February 25, with inflation expected to reach 1.4% y/y following January's CPI print.

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