Israel Inflation Stabilizes at 1.5% as August CPI Rises 0.7%
The Consumer Price Index for August 2026 rose by 0.7%, bringing annual inflation to 1.5%. Meanwhile, the Central Bureau of Statistics reported a 0.2% monthly increase in overall apartment prices for July 2026.
The Central Bureau of Statistics reported that the Consumer Price Index for August 2026 recorded an increase of 0.7% compared to July. Following this latest data, the annual inflation rate over the past 12 months stands at 1.5%. Price increases were led by fresh vegetables, which surged by 2.9%, transportation climbing 2.7%, culture and entertainment rising by 2.0%, and housing recording a 0.6% increase. Conversely, notable declines were registered in fresh fruit prices, which dropped by 2.0%, clothing falling by 0.8%, food prices decreasing by 0.5%, and furniture and household equipment registering a moderate drop of 0.3%.
Housing and Rental Market Dynamics
The rental housing component continues to draw attention and burden households. Tenants renewing leases experienced a 2.6% increase, while new tenants in apartments where a turnover occurred saw a significant surge of 4.4%. The Central Bureau of Statistics emphasizes that since most rental contracts do not change during the year, these figures reflect the annual rate of change among groups that renewed or signed new contracts. Simultaneously, the residential construction input price index fell by 0.1% in July. However, from an annual perspective looking back 12 months, an increase of 3.5% was recorded, driven primarily by a 5.4% jump in labor wages within the sector.
Capital Market Reactions and Interest Rate Outlook
The 0.7% increase in the August index aligned with early forecasts in the capital market, which estimated in advance that the index would post a sharp rise of 0.7% to 0.9%, positioning it at the lower end of the range. The outcome provides the Bank of Israel with a critical indication ahead of the upcoming interest rate decision in October, as it leaves the annual inflation rate well within the price stability target of 1% to 3%. Yossi Menashe, co-founder and co-CEO at Altshuler Shaham Financial Services, addressed the implications of the figure and emphasized that the real test now lies in the deep core components:
Beyond the headline figure, it is important to observe what is happening in the housing and services components, and to what extent the rise in import prices is already rolling over into local prices. A figure higher than forecasts could have narrowed the Bank of Israel's margin of action for further cuts, while a downward surprise reinforces the assessment that the inflation environment still allows for additional easing down the road.
Apartment Prices Show Second Consecutive Monthly Rise
Apartment prices have risen for the second consecutive month: the Central Bureau of Statistics published the apartment price index for July 2026, showing a 0.2% increase compared to June 2026, following a 0.1% rise in June. Regional increases were recorded in Tel Aviv with a 0.7% rise, the Central District with 0.3%, and the South with 0.1%. In contrast, decreases were recorded in Jerusalem, down 0.4%, Haifa down 0.3%, and the North down 0.1%. On an annual basis over the past 12 months, the apartment price index remains in negative territory, down 1.2%. Since the beginning of the year in January 2026, the index has cumulatively dropped by 1%.
The new apartment price index rose by 0.5% in July 2026 compared to the previous month. Annually, over the past 12 months, this represents a 0.8% decline. The Central Bureau of Statistics published for the first time the second-hand apartment price index, which is a quarterly rather than monthly measure. According to this index, second-hand apartment prices fell by 1.2% in the second quarter of 2026 compared to the first quarter. The most significant regional decrease was recorded in Jerusalem at 2.9%, followed by a 2% decline in Tel Aviv and a 1.1% drop in the Central District.
