Israel’s inflation rate remained unchanged at 2.50% YoY in November 2025, consistent with October’s figure and slightly above the 2.40% forecast. This stability follows a turbulent year where CPI fluctuated between 0.50% and 3.80%, reflecting shifting supply chain dynamics and energy price volatility. The current inflation rate sits near the Bank of Israel’s target range of 1–3%, suggesting a balanced inflation environment but with risks on both sides.

Drivers this month

• Shelter costs contributed 0.20 percentage points (pp), maintaining upward pressure.
• Energy prices stabilized, contributing 0.05 pp, after sharp swings earlier in 2025.
• Food prices rose modestly, adding 0.10 pp, reflecting global commodity trends.
• Used car prices declined slightly, subtracting -0.03 pp from overall inflation.

Policy pulse

The 2.50% CPI reading aligns closely with the Bank of Israel’s inflation target midpoint. This suggests limited immediate pressure for aggressive monetary tightening, though the central bank remains vigilant amid global uncertainties and domestic wage growth.

Market lens

Immediate reaction: The Israeli shekel (ILS) appreciated 0.15% against the US dollar within the first hour post-release, reflecting market relief at stable inflation. Short-term government bond yields edged down by 3 basis points, signaling tempered rate hike expectations.

Core macroeconomic indicators provide context for the CPI reading. Israel’s unemployment rate held steady at 3.70%, near historic lows, supporting consumer spending power. Wage growth accelerated modestly to 3.20% YoY, slightly above inflation, indicating real income gains. Meanwhile, GDP growth estimates for Q3 2025 were revised upward to 3.10% annualized, reflecting resilient domestic demand and export strength.

Monetary policy & financial conditions

The Bank of Israel’s policy rate remains at 3.25%, unchanged since September 2025. Financial conditions have eased slightly due to stable inflation and moderate global rate hikes by major central banks. Credit growth remains healthy at 5.50% YoY, supporting investment and consumption.

Fiscal policy & government budget

Fiscal policy remains moderately expansionary, with the government targeting a 3.80% deficit of GDP in 2025. Increased spending on infrastructure and social programs supports growth but poses inflation risks if demand outpaces supply. The budget outlook remains stable, with debt-to-GDP projected at 60%.

Drivers this month

• Shelter inflation remains the largest contributor, consistent with housing market tightness.
• Energy price stabilization helped cap headline inflation, contrasting with earlier spikes.
• Food inflation picked up slightly due to global supply constraints and currency effects.

Market lens

Immediate reaction: The ILS/USD exchange rate strengthened by 0.15%, reflecting market confidence in stable inflation. The 2-year government bond yield declined by 3 basis points, indicating reduced expectations for near-term rate hikes. Equity markets showed mild gains, with the TA-35 index up 0.40%.

Looking ahead, inflation in Israel faces a mix of upside and downside risks. The baseline scenario projects CPI remaining near 2.50% through mid-2026, supported by steady wage growth and moderate commodity prices. However, external shocks and domestic demand shifts could alter this path.

Bullish scenario (20% probability)

• Global energy prices decline sharply, easing cost pressures.
• Supply chain improvements reduce goods inflation.
• Monetary policy remains accommodative, supporting growth without inflation spikes.

Base scenario (55% probability)

• Inflation holds steady around 2.50%, consistent with current trends.
• Wage growth and fiscal spending support moderate demand.
• Monetary policy adjusts gradually if inflation deviates from target.

Bearish scenario (25% probability)

• Geopolitical tensions disrupt energy supplies, pushing prices higher.
• Stronger wage growth fuels inflation above 3.50%.
• Monetary tightening accelerates, risking slower growth or recession.

Policy pulse

The Bank of Israel is likely to maintain a cautious stance, balancing inflation control with growth support. Any sustained inflation above 3% could prompt rate hikes, while a drop below 2% might encourage easing.

Israel’s November 2025 CPI reading confirms a steady inflation environment after a year of volatility. The 2.50% rate aligns with the central bank’s target, supporting a stable macroeconomic outlook. However, ongoing geopolitical risks and fiscal expansion require vigilance. Financial markets have responded positively to the stable print, but the balance of risks suggests that policymakers must remain flexible. Investors should monitor wage trends, commodity prices, and external shocks closely to anticipate shifts in inflation dynamics.

Key Markets Likely to React to CPI

Israel’s CPI influences several key markets, including local equities, government bonds, and the currency. The TA-35 index often reacts to inflation surprises due to its sensitivity to consumer demand. The USDILS forex pair tracks inflation expectations and monetary policy shifts. Additionally, global commodity-linked assets like GLD (gold ETF) respond to inflation outlooks. Cryptocurrencies such as BTCUSD may also reflect inflation hedging demand. Lastly, the EURILS pair is sensitive to regional inflation and geopolitical developments.

Indicator vs. BTCUSD Since 2020

This table shows a loose positive correlation between rising inflation and BTCUSD price increases, reflecting Bitcoin’s growing role as an inflation hedge.

FAQ

What is the current CPI for Israel?

The November 2025 CPI for Israel is 2.50% year-over-year, unchanged from October.

How does the CPI affect Bank of Israel policy?

The CPI near 2.50% supports a steady monetary policy stance, with potential adjustments if inflation deviates significantly.

What are the risks to Israel’s inflation outlook?

Risks include geopolitical shocks, energy price volatility, and fiscal spending pressures that could push inflation above target.

Key takeaway: Israel’s inflation remains stable at 2.50%, balancing growth and price stability amid external uncertainties.

TA35 – Israel’s benchmark equity index, sensitive to inflation-driven consumer demand shifts.

USDILS – The US dollar to Israeli shekel exchange rate, reflecting inflation and monetary policy expectations.

GLD – Gold ETF, often a hedge against inflation uncertainty.

BTCUSD – Bitcoin, increasingly viewed as an inflation hedge.

EURILS – Euro to Israeli shekel pair, sensitive to regional inflation and geopolitical risks.