June CPI remains unchanged; annual inflation declines to 1.6%

ISRAEL - In Brief 17 Jul 2026 by Sani Ziv

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Israel's June CPI was unchanged (0.0% m/m), in line with our forecast and slightly above the market consensus of a 0.1% decline. Annual inflation slowed to 1.6%, its lowest level in five years and well below the midpoint of the Bank of Israel's target range. The main downside came from seasonal factors. Fresh fruit prices fell 7.9%, vegetables 3.0% and clothing and footwear 2.7%. Fuel prices declined 3.1%, reflecting lower global oil prices in June, while the appreciation of the shekel, 10% year on year, continued to weigh on tradable goods. These disinflationary forces were partly offset by higher prices for housing, food, recreation and health services.Housing remained the main source of inflationary pressure. The housing component rose 0.7% in June and 4.2% over the past year, accounting for most of headline inflation. Excluding housing, annual inflation stood at just 0.9%. We continue to think the 10.5% appreciation of the shekel over the past year has been the main factor behind the weakness in inflation. The table below summarizes the contribution of the main CPI components to both monthly and annual inflation in June. While declines in several tradable goods categories offset increases elsewhere, housing remained by far the largest contributor to annual inflation.Consumer Price Index, by expenditure category, June 2026Source: Central Bureau of Statistics (CBS) Looking ahead We expect the July CPI to rise by 0.3%, despite a further 4.1% decline in gasoline prices, which should subtract around 0.12 percentage points from the monthly index. Higher housing costs, together with seasonal increases in domestic vacations and airfares, are likely to more than offset the ...