For the first time this year, a negative index was recorded in Israel - the consumer price index surprised the economists when it decreased by 0.3%, compared to the average forecast for a decrease of 0.1%.
The encouraging data may create a certain illusion that the high interest rate in the economy is working and that inflation will soon return to the target of the Bank of Israel.
But it's too early to be happy.
Inflation decreased in August mainly due to the reduction in the price of fuel, which was not related to the Bank of Israel interest rate, but to the reduction of the tax on fuel (excise duty) and the downward trend recorded in oil prices worldwide.
It takes time for the interest rate increase to affect the price level in the economy.
The increase in interest rates increases the interest rates on mortgages, thereby lowering the disposable income of the public - which ultimately reduces consumption and prices - but these are processes that take time.
Inflation is expected, especially in rental prices, photo: Yehoshua Yosef
There is no escape from raising prices
So what awaits us next?
Meanwhile, the initial expectation is that the index for September will stand at 0%, relatively high for this month, which is usually characterized by negative indices.
Almost every day we are informed of price increases in the prices of food and other products - recently it was the Unilever company.
Some of the food chains did not approve the increases, but apparently, since this is such a widespread trend, they will have no choice but to raise the prices for the consumer, and the trend is expected to increase even more after the holidays, when the holiday promotions end.
Bottom line, looking ahead, at this point there is no reason for too much optimism.
However, inflation in Israel is still low in international comparison - less than half of the inflation level in the Eurozone, and the main reason for this is only a partial dependence on energy prices in the world thanks to natural gas reserves.
Unilever.
Raised prices, photo: Reuters
Accelerated price increase
What should really worry the decision makers is the housing price figure, which was also published this evening, according to which the annual rate of price increase accelerated from 17.8% to 17.9%.
The rate of increase in housing prices accelerated despite the Bank of Israel's aggressive interest rate hike and a series of data that indicated the moderation of demand in the housing market, such as the decrease in the volume of new mortgages and the decrease in the sale of new apartments.
In the market conditions that have been created, the annual growth rate of housing prices may continue to climb, if the government does not recalculate its course and does not take dramatic steps to address the housing crisis.
So why is the rate of increase in apartment prices not moderated?
Because the demand for apartments is greater than the supply of apartments for sale.
The amount of apartments "on the shelf" decreased for several reasons.
The first is a decrease in the supply of "second-hand" apartments on the market - investors are selling fewer apartments (and also buying fewer apartments following the increase in the purchase tax).
Also, the number of apartments that are sold at the price per tenant is getting smaller, and the third reason is that the contractors sell fewer apartments on paper.
In addition to all of this, following the amendment to the sales law that was carried out in the summer and caused the cancellation of the linkage to the construction input index, some contractors raised their prices.
Housing prices are still rising, photo: Ami Shoman
"Dramatic solutions are required"
According to Raul Sargo, the president of the Boni Ha'aretz contractors' association: "We see a cumulative effect, which causes apartment prices to continue to rise. Interest rates do not solve the housing crisis. Dramatic solutions are needed here, and we propose to the next government to make a package deal with the contractors, as they did in 1984, each party will pay its share.
"That the contractors freeze the prices of the apartments. The state will sell the 300,000 housing units it has to the contractors, flood the market with land, and pay the local authorities about NIS 50,000 for each housing unit for which they issue a building permit. Everyone will benefit from this situation, and at the same time it will lower the prices of The apartments. This is a dramatic step that can be taken for a limited period."
Raul Sargo, president of the Ha'aretz Construction Contractors Association, photo: PR
Sargo adds: "A different government program is needed. The increases that continue time and time again show that the government needs to recalculate its course. It cannot continue with the same programs such as the price per tenant or a lottery for an apartment at a discount. This does not solve the problem - it only wastes public money."
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