Israeli economy experienced deflation in 2015
Israel has negative inflation for unprecedented second consecutive year, while the Bank of Israel is not expected to drop interest rates to halt the worrying trend.
The Israeli economy is experiencing major deflation, the latest figures showed, with prices falling by one percent in 2015.
For the first time in Israel's history, the economy experienced deflation for two consecutive years. Prices dropped by 0.2 percent in 2014. Deflation can indicate concerns of a recession, stagnant wages, and fumbling corporations.
The figures are a cause of concern for the Bank of Israel, but it appears that the institution does not plan to lower interest rates – which could cause a rise in consumption and price increases, thus boosting inflation. The reasoning behind this position is that Israel would have a hard time enacting an interest policy opposed to that already begin in the United States, with other countries expected to follow suit and raise rates.
Estimates predict that the Bank of Israel could begin raising the interest rate in the fourth quarter of 2016.
