Israel Consumer Price Index

The Israel Consumer Price Index is the official monthly index used to measure changes in consumer prices in Israel. It is compiled by the Central Bureau of Statistics and tracks the change in expenditure needed to buy a representative basket of household goods and services whose prices are measured regularly.^[1]

Overview

The Consumer Price Index, commonly abbreviated CPI, is Israel’s central statistical measure of consumer-price inflation. In practical use, the index converts many individual price observations into a single time series, allowing users to compare the cost of a defined consumer basket across months and years. The Central Bureau of Statistics describes price indices as measures of the percentage change in the expenditure needed to buy a set “basket” of products and services whose prices can be measured regularly.^[2]

The CPI is distinct from a cost-of-living index in the broadest welfare sense. It does not attempt to measure every change affecting households’ standard of living, such as changes in income, taxes, public-service quality, or asset prices. Instead, it is a price index for household consumption items. The CPI therefore answers a narrower but important question: how much more or less expenditure is required to purchase the same or comparable basket of consumer goods and services over time.

The index is important in Israeli finance because it is the reference point for inflation measurement, monetary policy assessment, indexation clauses, and economic analysis. The International Labour Organization’s metadata for Israel identifies the CPI as a monthly index compiled by the Central Bureau of Statistics’ Consumer Price Index department and lists its main uses as wage, pension, rent and contract indexation; the main inflation indicator for monetary policy; deflation of household expenditure in national accounts; purchasing-power computation; macroeconomic modelling; and other analytical uses.^[3]

Compilation and publication

The Central Bureau of Statistics is the institution responsible for compiling the Israel CPI. The index is published monthly, and the CBS maintains a publications page for consumer-price-index releases and related tables.^[4] The CBS also provides programmatic access to price-index data through an API interface. The API documentation states that users can retrieve index data by index code, date range, number of most recent observations, and other parameters, and it identifies chapter “a” in the CBS price-index API as the Consumer Prices Index chapter.^[5]

Monthly publication makes the CPI one of the most frequently watched macroeconomic indicators in Israel. The release cadence allows policymakers, banks, analysts, businesses and households to monitor recent price developments with a relatively short delay. Users typically examine both the monthly change in the index and the twelve-month change, the latter being the common measure of annual inflation.

The CBS publishes the CPI alongside other price indices, including producer and input price indices. This matters because consumer-price inflation is only one layer of the price system. Producer prices, construction-input prices and other sectoral indices can move differently from consumer prices, depending on exchange rates, taxes, commodity prices, administered prices, margins and timing lags. For monetary policy and contract indexation, however, the broad CPI is the main consumer-facing measure.

Basket, weights and base periods

The CPI basket represents household consumption. CBS explanatory notes define the CPI as measuring the percentage change over time in the expenditure necessary to purchase a fixed basket of a family’s goods and services whose prices can be measured regularly.^[1] The basket is periodically updated because household spending patterns change with income, technology, demographics, regulation and relative prices.

The same CBS explanatory notes state that price indices are updated every few years, including an examination of basket components and an updating of the basket; the weights of the basket components are calculated according to the new base period.^[1] This procedure is important because an index with outdated weights may put too much emphasis on items that households no longer buy in the same quantities and too little emphasis on newer or growing categories of consumption.

Weights are used to combine the price movements of many goods and services. A price change in an item that accounts for a large share of household expenditure has a larger effect on the aggregate CPI than an equal percentage change in a small category. Housing, food, transportation, communications, clothing, health, education and other household categories therefore influence the CPI according to their basket weights, not merely according to the visibility or public salience of price changes.

Base periods allow index values from different periods to be expressed on a common reference scale. CBS explanatory notes explain that different series of the same index, presented according to different base periods, can be linked and presented on a uniform base by using a chaining coefficient.^[1] Chaining is a standard index-number practice that allows a long CPI history to continue even when the basket, weights or reference period are updated.

Coverage and scope

The Israel CPI is designed to cover resident household consumption rather than every transaction in the economy. International CPI metadata for Israel identifies the geographical coverage of both weights and price collection as nationwide, with population coverage of resident households of nationals and exclusion of institutional households.^[3] This means the index is intended to reflect household consumer prices across the country, while not representing institutional consumption in places such as prisons, hospitals or other collective living arrangements.

CPI coverage is partly determined by what is treated as consumption. The ILO metadata for Israel lists a range of included expenditures and also lists exclusions. For example, mortgage repayments and mortgage interest are excluded from consumption expenditure in that metadata, while several forms of household consumption and fees are included.^[3] These distinctions are important because households may experience mortgage costs as financially significant, but such financing costs are not always treated as consumer prices in CPI methodology.

Housing is one of the areas where users must be careful in interpreting the CPI. Israel’s CPI includes housing-related components, including rent-based measures. CBS methodology for average rent prices states that rent-contract data are collected in the CBS Rent Survey and that these data are used in calculating the indices for “Free-market Rent” and “Owned Dwellings Services” within the housing item of the CPI.^[6] This approach is separate from measuring the purchase prices of dwellings as assets.

The distinction between consumer prices and asset prices is central. A dwelling purchase combines consumption of housing services with acquisition of a long-lived asset and financing decisions. By contrast, the CPI’s role is to measure consumer-price changes. Users looking at house-price inflation, mortgage burdens or real-estate affordability therefore need additional housing-price and credit indicators, not only the CPI.

Monetary-policy role

The CPI is the reference measure for Israel’s inflation-targeting framework. The Bank of Israel states that the government, in consultation with the Governor, sets a price-stability target defined as a desired annual rate of increase in the CPI; the current target is between 1 percent and 3 percent per year.^[7] The Bank also states that it is obliged to strive to achieve that goal.^[7]

Under the Bank of Israel’s framework, the CPI is not merely a statistical publication but a policy anchor. The central bank uses the Bank of Israel interest rate and other tools to influence demand, savings, credit conditions and inflation expectations. The Bank’s monetary-policy explanation states that it sets the rate of interest at a level intended to keep inflation within the target range or return inflation to that range within no longer than two years.^[7]

The Bank of Israel’s objectives page states that its main function is to maintain price stability and that the price-stability range is currently defined as annual inflation of 1–3 percent.^[8] It also states that the Bank is responsible for deciding on the short-term interest rate required to meet the inflation target set by the government.^[8] In institutional terms, this gives the CPI a direct role in the framework guiding the Monetary Committee of the Bank of Israel.

In 2024, the Bank of Israel published conclusions from a review of the inflation target. The Bank said that Israel’s government decision in August 2000 set the inflation target at 1–3 percent from 2003, defining it as price stability, and that the review concluded it was appropriate to maintain the existing target range.^[9] This confirms the continuing importance of CPI inflation as the benchmark for monetary-policy evaluation.

Indexation in Israeli finance

A notable feature of Israeli finance is the widespread use of CPI indexation. The CPI can be used to adjust nominal amounts in contracts so that the real value of payments is partly preserved when consumer prices change. The ILO metadata for Israel lists indexation of wages, pensions and social-security payments, rents, contracts and other payments among the CPI’s main uses.^[3]

CPI indexation can appear in public-sector arrangements, private contracts, leases, savings products, bonds and long-term liabilities. In such cases, the CPI is often used to calculate an updated principal, rent, payment or threshold. The exact legal effect depends on the contract or statute, including the reference month, publication date, treatment of negative index changes, rounding rules and whether the adjustment is one-sided or symmetric.

For securities markets, the CPI is relevant to inflation-linked debt. Israel has an active government-debt market, and CPI-linked instruments are part of the broader fixed-income landscape. The CPI also affects real yields, inflation expectations, pension liabilities and valuation models. Investors and analysts generally distinguish between nominal returns, which are measured in current shekels, and real returns, which adjust for inflation as measured by a price index such as the CPI.

In household finance, CPI indexation can have mixed effects. A saver holding a CPI-linked asset may be partly protected from unexpected inflation, while a borrower with CPI-linked debt may see the indexed principal or payments rise when the CPI increases. These effects are mechanical consequences of indexation formulas and are separate from any assessment of whether a given product is suitable for a household.

Interpretation and limitations

The CPI is an average measure. It does not describe the inflation rate faced by every household. Different households spend different shares of their budgets on rent, food, transportation, childcare, health services, education, energy, communications and imported goods. As a result, an individual household’s experienced price change can differ materially from the national CPI.

The index is also affected by the construction of its basket. Since the CPI is based on a defined basket and weights, it may not immediately capture all substitutions consumers make when relative prices change. Basket updates mitigate this issue over time, but a monthly fixed-basket index is not the same as a continuously changing measure of actual current spending. The Bank of Israel noted during the COVID-19 period that shifts in the composition of consumer spending could complicate interpretation of official inflation data calculated by the CBS on the basis of a fixed basket.^[10]

Quality adjustment is another interpretive issue. Many products change in quality, size, features or service terms over time. Statistical agencies must decide how to compare current prices with earlier prices when products are not identical. If a smartphone, vehicle, medical service or communication package changes in quality, the observed price movement may combine pure price change with a quality change. Methodology, sample design and professional judgement therefore matter.

The CPI also differs from exchange-rate movements. Israel is a small open economy, and import prices and the shekel exchange rate can influence domestic consumer prices. However, the CPI is not an exchange-rate index. Imported-goods prices, local distribution costs, taxes, margins, wages, rents and regulated prices all contribute to consumer-price outcomes. A depreciation of the shekel may raise some consumer prices, but the timing and magnitude vary by category.

Data access and series use

CBS data users can access CPI information through regular publications and the CBS API. The price-index API documentation describes endpoints for retrieving data for a specific index by code, retrieving values over selected periods, obtaining the most recent values, and using a linkage calculator.^[5] This makes the CPI accessible not only as a published release but also as machine-readable data for research, reporting and internal systems.

When using CPI data, it is important to identify the relevant index series and base. The CBS API documentation provides examples for retrieving index data by index code and for retrieving main indices by various bases.^[5] Because historical series may be linked across base periods, users should ensure that comparisons are made on a consistent base or with appropriate chaining coefficients.

Analytical uses commonly include calculating month-on-month inflation, twelve-month inflation, average annual inflation, real interest rates, real wages, real returns and inflation-adjusted budget amounts. The appropriate calculation depends on the question. For example, an annual average CPI can be useful for national-account deflation, while a point-to-point twelve-month change is commonly used for the headline inflation rate.

Relationship to other Israeli finance entries

The Israel CPI is closely connected to the Bank of Israel, because CPI inflation is the benchmark used in the central bank’s price-stability framework. It is also connected to the Bank of Israel interest rate, which is the main monetary-policy instrument used to influence inflation. The Monetary Committee of the Bank of Israel evaluates inflation developments and sets policy accordingly.

The index is also relevant to government finance and securities markets. The Ministry of Finance (Israel) and the Accountant General of Israel operate in an environment where inflation affects debt-service costs, real spending, revenue projections and investor demand. On the market side, CPI developments influence yields and valuations for listed securities and fixed-income instruments traded through the Tel Aviv Stock Exchange.

For households, the CPI is relevant to long-term savings vehicles such as Keren Hishtalmut and Kupat Gemel, because inflation affects real returns and purchasing power. It is also relevant to banks such as Bank Leumi, Bank Hapoalim, Israel Discount Bank and Mizrahi-Tefahot Bank, since inflation influences interest-rate expectations, credit pricing, deposits, mortgages and indexed financial products.

Significance

The Israel Consumer Price Index is a foundational index for the Israeli financial system. It provides a common reference for inflation, supports central-bank accountability, enables indexation, and allows nominal economic data to be converted into real terms. Because it is compiled monthly by the Central Bureau of Statistics and used across policy, contracts and markets, it is one of the most important statistical series in Israeli finance.

At the same time, the CPI should be read as a carefully defined statistical index rather than a complete description of every household’s cost pressures. Its meaning depends on its basket, weights, scope, base period, and calculation methods. For finance users, the key is to understand both its authority as the official consumer-price measure and its methodological boundaries.