Local analysts warn that Israel is among the countries where food prices react most slowly to exchange rate changes, due to the strong presence of local production, long-term supply contracts, and a market structure with little flexibility to pass on cost reductions in the short term. One of the main factors explaining the lag in price drops is the inventory gap. Against the general trend, prices in the food sector continued to show increases, which limited the perception of improvement in purchasing power. In these segments, the stronger local currency allowed for a reduction in the cost of imported products or inputs acquired abroad, generating partial relief in the spending of urban households. The appreciation of the shekel, along with more favorable financial conditions, was one of the central factors that contributed to moderating inflationary growth, although its effects were not reflected uniformly across all consumption sectors. Throughout the year, declines or stagnation in prices were observed in sectors particularly sensitive to the exchange rate, such as clothing, footwear, furniture, and appliances. Importers and large retail chains often purchase goods with several months' advance notice and fix or hedge the exchange rate at the time of placing orders. In this context, a reduction in wholesale prices does not always translate immediately into lower final prices for the consumer. The perception of relief in households remains gradual and uneven, especially among middle- and low-income sectors, where the weight of spending on food remains decisive. In the appliances segment, for example, a large part of the products sold during 2025 had been purchased four to six months earlier, when the exchange rate was less favorable. To this phenomenon is added the high market concentration in certain sectors and a cost structure that limits competition. Economists warn that this rigidity contributes to prolonging the feeling of scarcity, even in a more stable macroeconomic scenario. Looking ahead to the short term, no significant increases are anticipated, nor an abrupt drop in the cost of living. As a result, the appreciation of the shekel is slow to reach the shelves. Thus, while contained inflation represents a positive signal for Israel's economy, the pending challenge is to accelerate the transmission of macroeconomic stability to daily prices and consumers' pockets. Sources: Bank of Israel; Central Bureau of Statistics of Israel; reports from local economic analysts; Israeli economic press.
