Israel's June CPI Down 0.3% On Month, Up 1% On Year

Israel's consumer price index declined 0.3% on the month in June, while annual inflation was 1%, the Central Bureau of Statistics said Sunday.

In May, the CPI was flat on the month and annual inflation was 1.6%.

These figures come as Israel's economy continues to grow, but at a slower pace than last year. The Bank of Israel recently reduced the interest rate for July by 25 basis points to 2.25%, citing growing worries about the economic slowdown in the U.S. and continuing debt crisis in Europe.

Israel depends highly on these markets for its exports, which have slowed in recent months.

In June, all elements of the consumer price index declined on the month expect apartment rents, which rose slightly. The sharpest decreases were in the prices of fruits and vegetables and communication expenses.

Following pressure from last year's massive social protests, many food companies have cut prices, and the government eased its regulation of the mobile phone sector, allowing more companies to enter the market with lower prices.

The Bank of Israel will set the interest rate for August next week.

While the level of inflation seems to indicate a possible reduction, the bank recently said it would be more difficult to reduce the rate further in light of the growing budget deficit.

The government recently announced that the deficit would reach 3% of gross domestic product in 2013, rather than 1.5%, as previously planned. The central bank has criticized that decision, urging the government to cut spending and raise taxes.

Write to Sara Toth Stub at slotmoney@dowjones.com

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