Macroeconomic Forecast Israel

BMI View: We have increased our end-year consumer price index (CPI) inflation forecast to 1.7%, in the light of Q3 data. Inflation was 1.9% y-o-y in September, but the combination of lower oil prices and higher interest rates in Q4 means end-year inflation will be somewhat lower. Some additional downside risk comes from tax policy: the finance ministry is considering cutting value-added tax (VAT) faster than originally planned. If this is implemented, our inflation forecast will decrease while our growth forecast will increase (owing to the tax cut's positive effect on domestic consumption).

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