JERUSALEM, Jan 15 (Reuters) - Israel's inflation eased more than expected in December to end 2024 at 3.2% versus 3.0% in 2023, according to data on Wednesday from the Central Bureau of Statistics that could entice policymakers to start reducing interest rates soon.

The annual inflation rate (ILCPIY=ECI) , opens new tab in December eased to its lowest level since July, slowing from 3.4% in November.

The December rate was below expectations of 3.4% in a Reuters poll but still exceeds the government's 1%-3% annual target range.

Government officials have largely blamed war-related supply issues for the spike in inflation over the past year, when price pressures have eased globally, although the central bank believes demand is also helping to keep prices high.

The consumer price index (ILCPI=ECI) , opens new tab slowed by a bigger than expected 0.3% in December from November on lower costs of fresh produce, transportation, shoes and entertainment. These were only partly offset by gains in the price of housing, healthcare, food and clothing. A Reuters poll had expected a 0.1% decline.

After cutting its benchmark interest rate last January, the Bank of Israel has left the rate unchanged since, including most recently at its Jan. 6 policy meeting when it cited expectations of higher inflation in coming months and economic uncertainty caused by Israel's war with the Palestinian militant group Hamas in Gaza.

But central bank governor Amir Yaron also held out the prospect of rate reductions should price pressures start to ease. The bank next decides on rates on Feb. 24.

Prices on a host of goods including water and electricity as well as some taxes have risen at the start of 2025.

"Despite the decline this month (December), we expect the annual inflation rate to continue to rise in the coming months due to the wave of price increases that has already been announced by various manufacturers and importers and due to the increase in VAT," said Dror Ohev Zion, chief executive of real estate marketing firm Dara.

"The inflation rate is high and beyond the target set by the Bank of Israel. This fact is very disturbing and burdensome for both entrepreneurs and home buyers."

The shekel was 0.5% higher versus the dollar at 3.61.

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https://www.reuters.com/world/middle-east/israel-inflation-eases-december-32-rate-2024-2025-01-15/