Israel Inflation Forecast Steady at 2.2% Amid Global Market Shifts
Leader Capital Markets released its weekly economic review, highlighting a steady 2.2% annual inflation forecast for Israel, global bond market trends, and softening US labor data.
Economist Yonatan Katz and the analysts at Leader Capital Markets have published a comprehensive weekly economic review, assessing key developments across both local and global markets.
Microeconomic Outlook and Bond Markets
The one-year inflation forecast remains steady at 2.2%. Softer employment data has diminished the likelihood of a Federal Reserve interest rate hike this month. Meanwhile, surging yields in France underscore the critical importance of fiscal credibility.
In the bond market, stability in the weekly pace of debt issuance reinforces assessments that a fiscal deficit underperformance is expected this year. For long-term investors, 10-year yields hovering around 4.25% represent an attractive asset class, though short-term markets may experience volatility due to political uncertainty surrounding upcoming elections.
Israel Macro: Inflation and Housing Dynamics
Changes to fuel excise taxes ahead of the elections are driving frequent updates to near-term inflation forecasts. Fuel prices are projected to drop by 6%, bringing the October CPI forecast to 0.2%, following a 0.3% increase in September. The primary variable remains the exact timing for lifting the full 1-shekel fuel subsidy, which carries a monthly cost of 320 million shekels—whether it will be phased out at the beginning of November or spread across two months. Analysts have modeled a split across November and December, with no impact on the annual forecast.
"The one-year inflation forecast remains at 2.2%, assuming exchange rate stability, a 2.9% rise in housing components, a 3.2% increase in food prices, business wage growth of 5%, and a 6% drop in global oil prices to $88 per barrel for Brent crude," note the analysts at Leader Capital Markets.
Global Markets: US Labor and European Inflation
In the United States, employment figures came in softer than anticipated, with non-farm payrolls adding just 29,000 jobs in September compared to expectations of 90,000, alongside a downward revision of 60,000 jobs across the previous two months. The unemployment rate ticked up slightly to 4.2% from 4.1% amid rising labor force participation.
In Europe, headline inflation accelerated to 3.8% in September from 3.2% in August, topping consensus forecasts of 3.5%, while core inflation edged up to 2.5% from 2.4%. This persistence supports expectations for further monetary tightening, likely in December, despite dovish rhetoric from central bank leadership.
