Israel April CPI surges, rate hike may follow

By Steven Scheer

JERUSALEM, May 15 (Reuters) - Rising food and energy costs pushed Israeli consumer prices sharply higher in April to reach an annual rate of 4.7 percent, a level that analysts say could prompt an interest rate increase later this month.

The Central Bureau of Statistics said on Thursday that the consumer price index, Israel's main inflation gauge, rose 1.5 percent in April compared with March -- the highest monthly rise in six years.

Economists had expected a 0.9 percent monthly increase and 4.1 percent year on year rise, according to a Reuters poll. Inflation was 3.7 percent in March.

Israel has an official annual inflation target range of 1 to 3 percent.

The shekel <ILS=> appreciated some 1 percent after the CPI was published to hit a two-month high of 3.3850 per dollar, near an 11-year peak of 3.35 reached in mid-March.

"Today's data definitely makes a May rate hike more likely," said Caroline Grady, an emerging markets economist at Deutsche Bank.

The Bank of Israel is slated to next decide on interest rates on May 26.

Expectations that a U.S. slowdown would hurt Israel's economy and ease inflation later this year led to two half-point rate reductions in February and March, bringing the key lending rate to a record low of 3.25 percent.