December's consumer price index rose by a moderate 0.2%, after the previous two months recorded a negative CPI – down 0.5% in November and 0.2% in October. September's CPI remained unchanged from August.
The inflation rate for 2012 totals 1.6%, compared to 2.2% in 2011 and 2.7% in 2010. The inflation trend in the past four months is even slightly lower, amounting to an annual rate of 1.4%.
The inflation rate expected for the next 12 months, calculated by the Bank of Israel as an average of analysts' estimates, recently hit a new low of 1.8%. Such a low level of inflation expectations was last recorded in the Israeli economy in 2009, in the midst of the major financial crisis.
The following goods and services contributed more than others to the annual index: Housing services (up 3.4%), electricity for home use (8.8%), cigarettes (21.2%), fuel (5.1%), poultry (10.8%), milk and dairy products (4.1%) and property tax (2.2%).
These hikes were partially compensated by reductions in the prices of fruit (5.7%), tomatoes (27.6%), cucumbers (19.7%), educational services (5.8%) and Internet services (9.9%).
Despite the low inflation rate, the Bank of Israel is expected to leave its key interest rate unchanged at 1.75% in the end of January, after cutting interest rates by 0.25% last month.