Milk prices up 3.2% in June

Consumer price index records 0.4% increase, with inflation rate totaling 4.2% - exceeding upper limit of the target range set by government by 1.2%

Amnon Atad, Calcalist|Published: 07.16.11 , 08:03

The consumer price index went up by 0.4% in June, the Central Bureau of Statistic reported Friday, meeting analysts' expectations.

As a result of this rise, the actual inflation rate for the past 12 months (the June 2011 index compared to June 2010) now totals 4.2%, exceeding the upper limit of the target range set by the government (1-3%) by 1.2%.

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The inflation trend in the past four months is lower, totaling 2.9%.

Last month's CPI was mainly affected by price hikes in the following categories: Clothing and footwear (8.6%), food (0.8%) and housing (0.5%). These prices hikes were partially compensated by price reductions at an average rate of 2.1% in the fruit and vegetable category.

Price hikes were mainly recorded in the following products: Milk and dairy products (3.2%), butter (16%), cars (1.3%), clothing (9.3%), footwear (6.4%) and coffee (7.9%).

Price reductions were recorded in the following products: Books (11.6%), travel expenses (0.7%), poultry (2%), fresh vegetables (3.1%), fresh fruit (4.7%) and petrol (2.1%).

The housing services index saw a 0.7% increase and the rent index went up by 0.3%.

In spite of the inflation rate's ongoing deviation from the annual target, Bank of Israel Governor Stanley Fischer is expected to leave the interest rate unchanged at 3.25% this month, for the second time in a row.

Fischer's inclination to leave August's interest rate unchanged is backed by several factors: Fear of a further appreciation of the shekel against the US dollar and euro, the slowdown recorded in Israel's economic activity in the past two months, and fear of a renewed regression in the global economy in light of the large deficits of the US government and the new round of debt crises in Europe.