Israel inflation rate reaches two-year low of 3%

Economic cost of war: Inflation rate in Israel edged down more than expected to 3 per cent in December from 3.3 per cent in November, the Central Bureau of Statistics said on Monday - its lowest level in two years which could support further central bank interest rate cuts.

A Reuters poll had expected the rate to ease to 3.1 per cent last month. The consumer price index fell 0.1 per cent in December from November. 

Israel's war against Hamas militants is weighing on economic growth and helping to bring down inflation back down, with the rate now within an official rate of 1-3 per cent for the first time since December 2021.

The Bank of Israel earlier this month lowered its benchmark interest rate by 25 basis points to 4.5 per cent, its first cut in four years. But it cautioned that looser fiscal policy due to higher defence spending could slow the pace of future reductions.

One hundred days after Hamas gunmen broke out of Gaza to launch the deadliest attack in Israel's history, tens of thousands of Palestinians have been killed, Gaza lies in ruins and the Middle East is sliding towards a wider, more unpredictable conflict. For both Israelis and Palestinians, the war has been a trauma that looks likely to last for years, deepening the hostility and mistrust that have stood in the way of peace for more than 75 years.

"No one will win," said Rebecca Brindza, a spokesperson for families of the 240 Israelis and foreigners seized as hostages during attack on communities around the Gaza Strip that opened the war on Oct. 7.

Conflict so far 

The attack killed more than 1,200 people, the biggest single day loss of life since the founding of the state of Israel in 1948, and the shock was compounded by the multiple accounts of rape and sexual violence that emerged in the following weeks.

The Israeli response was immediate and unrelenting, beginning with a systematic aerial bombardment and followed by a ground invasion that have together laid waste to Gaza and forced almost 2 million people to flee their homes. In a statement marking the 100 days, the Palestinian ministry of foreign affairs accused Israel of creating "a circle of death" in Gaza.

Israeli officials say they do all they can to avoid civilian casualties and they accuse Hamas of hiding its network of tunnels and military infrastructure among Gaza's civilian population, deliberately putting them at risk.

Yet that offers little comfort to the tens of thousands who have lost relatives to the bombardment.

"I come here everyday, longing for them," said Khaled Abu Aweidah, who lost 22 members of his family to an air strike and who still searches the mountains of rubble that was his family home in vain for any sign of three children buried there.

(With Reuters inputs)