Israel Inflation Rate Falls Below 3%, Reenters Target

Israel's annual inflation rate edged up to 2% in February 2026, up from 1.8% in January. The reading fell mid-point of the Bank of Israel's 1%-3% target, remaining in the range for the seventh consecutive month. Price increases strengthened slightly for food (0.3% versus 0.1%) and housing (0.3% versus 0.1%), while rebounding for education, culture and entertainment (0.5% versus -0.4%) and transport and communication (0.3% versus -2.5%), and slowing for dwelling maintenance (0.3% versus 0.6%). Meanwhile, deflation took place for health (-0.1% versus 0.7%), softened for clothing and footwear (-2.4% versus -3.9%) and deepened for furnishings and household equipment (-0.2% versus -0.1%). On a monthly basis, inflation rebounded to 0.2%, up from a decline of 0.3% in the previous month.

Israel's annual inflation rate fell to 1.8% in January 2026, its lowest level since June 2021, from 2.6% in December. The reading fell toward the mid-point of the Bank of Israel's 1%-3% target, remaining in the range for the sixth consecutive month. Deflation took place for clothing and footwear (-7.7% vs -8.0% in December 2025) and furnishings and household equipment (-4.0% from -3.3%.) Meanwhile, price growth slowed notably in transport and communication (0.2% vs. 2.7%), education, recreation and culture (1.4% vs. 2.0%), and dwelling maintenance (1.8% vs. 3.3%). Upward pressure stemmed mainly from higher prices for housing (3.8% vs. 3.7%), fruits and vegetables (2.3% vs. 2.0%), and health (2.3% vs. 2.2%). On a monthly basis, consumer prices fell by 0.3%.

The annual inflation rate in Israel picked up to a four-month high of 2.6% in December 2025 from 2.4% in the prior month. Still, inflation stayed within the government’s annual target range of 1% to 3% for the fifth month running. Main upward pressure came from prices of vegetables & fruit (2% vs -2.7% in November); housing (3.7% vs 3.3%); transport & communication (2.7% vs 1.3%) and miscellaneous (4.7% vs 5.1%). On a monthly basis, consumer prices were flat in December, after a 0.5% decrease in the previous month. Inflation rate averaged 2.6% in 2025, down from 3.2% in 2024.