Israel's inflation forecast has been adjusted down to 2.5% just in time for the holidays.
Following the drop in the inflation rate, the head of the Bank of Israel Stanley Fischer, may reduce the Israeli economy's interest rate from 3.25% to 3% on Monday, in a balancing act aimed at curbing the slowdown and preventing the start of a possible recession.
Israel's Central Bureau of Statistics repored the slowdown compared to first quarter of 2011, during which Israeli economy grew by 4.7%
But that same slowdown has affected inflation to the consumers benefit. After a long period with a high inflation rate, significantly exceeding the governmental target of 1-3%, and after the consumer price index for July surprised analysts by dropping 0.3%, the Bank of Israel this week updated its annual inflation forecast for the next 12 months to 2.5%.
A forecast published in February placed the inflation rate at 3.8%. It was later reduced to 2.9% in July.
The slowdown, renewed global recession, unrest in the Mideast, social protests domestically, and renewed border tensiosn have led to a sharp drop in demand and therefore to price reductions.
A drop in interest rates may help Israel's stock exchange recover slightly, following the significant falls in recent weeks, as it will reduce the attractiveness of investing in interest-bearing alternative assets.
Fuel prices are expected to fall significantly at the end of August due to the drop in global oil prices worldwide during the month. Stores are still offering special sales, especially in the food category, as a way of marketing to social protesters.
Israel's job forecast remains solid with high paying jobs available for those willing to learn the necessary skills. Shraga Brosh, chairman of the Israel Industrialists Association, reported a full 82% of companies belonging to the Industrialist's Association, Israel's largest lobby, said they were having a hard time finding workers.
Lower inflation means one thing for Israeli consumers: low and even negative indices for August and September. Lower prices right in time for the High Holidays.