JERUSALEM: Israel's annual inflation rate rose in June to 3.3%, according to data on Tuesday from the Central Bureau of Statistics that will likely keep monetary policymakers from reducing interest rates soon.

The rate was 3.1% in May.

The June rate topped expectations of 3.1% in a Reuters poll and stayed above the government's 1%-3% annual target range.

Last week, the Bank of Israel held its benchmark interest rate at 4.5% for a 12th straight meeting and was noncommittal on when it would resume rate cuts despite an easing of inflation in May as well as a sharp drop in the country's risk premium following Israel's war with Iran.

Bank of Israel Governor Amir Yaron said at the time that there was a danger supply constraints that have helped fuel price pressures may linger and that policymakers sought to see clear signs of inflation falling back into the bank's target range.

Some economists had believed rate cuts could resume again as early as August. The central bank's staff has forecast three 25-basis point reductions in the next year on a projection that inflation will ease to 2.2%.

On a monthly basis, the consumer price index rose by 0.3% in June from May, after a 0.3% drop the prior month, led by gains in costs of entertainment, food, fresh vegetables, housing, healthcare, and transportation and telecommunications, the Central Bureau of Statistics' data showed.

These were partly offset by lower prices of fresh fruits, clothing and furniture. A Reuters poll had expected a 0.1% rise month-on-month.

Inflation has been volatile so far in 2025 due to the cost of airfares, which have fluctuated widely during the war in Gaza and the Iran conflict in June as many foreign carriers halted flights leaving only Israeli flag carrier El Al and smaller domestic rivals.

 

(Reporting by Steven Scheer; Editing by Emelia Sithole-Matarise)