By Steven Scheer
JERUSALEM, April 15 (Reuters) – Israel’s annual inflation rate moved back below 2% in March but the decline will likely have little impact on near-term interest rate decisions due to a spike in global energy costs caused by the conflict with Iran.
Inflation slipped in March to 1.9% from 2.0% in February, according to data on Wednesday from the Central Bureau of Statistics, coming in lower than a 2.1% rate in a Reuters poll and staying well within the government’s 1-3% annual target range.
The U.S. and Israel began striking Iran on February 28, after which an effective blockade of the Strait of Hormuz by Iran led to a sharp rise in oil prices. The U.S. has since begun its own blockade.
Economists had expected higher energy costs to help push up the consumer price index by 0.5% in March from February, but it rose just 0.4%.
Price gains in March were led by fresh vegetables and clothing.
Citing the inflationary effects of the war with Iran, the Bank of Israel on March 30 held its short-term interest rate at 4% for a second straight month after two consecutive reductions in November and January from 4.5%.
Bank of Israel Governor Amir Yaron, though, has held out the prospect of one or two cuts this year, depending on inflation.
Avraham Novogrocki, president of Israel’s Manufacturers’ Association, called on policymakers to cut rates in response to a more than 30-year peak of the shekel against the dollar that is harming exporters.
The shekel gained 0.5% versus the dollar to 2.993, the first dip below 3 shekels to the dollar since 1995.
Novogrocki said the smaller-than-expected rise in March’s CPI reinforced the notion that inflation is contained.
It “indicates that industry is absorbing the cost increases and is not passing them on to the consumer,” he said.
“There is no longer any justification for postponing the move” to cut rates, he added.
(Reporting by Steven Scheer; Editing by Aidan Lewis)
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