Many people in Israel, especially US expats, say the past year felt financially brutal. There’s a clear reason, and official statistics don’t fully capture it.

Many people in Israel, especially US expats, say the past year felt financially brutal.

There’s a clear reason, and official statistics don’t fully capture it.

If the currency of your income is not indexed to the shekel, your buying power can quietly shrink even if your salary never changes.

For USD earners in Israel, two things happened at once in 2025:

 • Local prices officially rose about 3%, in a year which was widely regarded as having high inflation across the board, fueled by a 1% increase in VAT at the beginning of the year.

 • The US dollar weakened roughly 6–7% against the shekel

When income isn’t shekel-indexed, currency movement acts like a silent pay cut. Each dollar converts into fewer shekels, while expenses are paid in shekels. 

These effects stack, resulting in close to a 10% real loss in purchasing power for many families.

There's also another layer.

That 3% inflation figure is an official CPI average. Real households don’t live in averages.

For instance, for a family of 7 with 5 young children, spending is heavily weighted toward:

 • Groceries

 • Rent

 • Utilities

 • Children’s expenses

These categories rose far more than the CPI average. Grocery prices in particular jumped well above 3%, especially after the 1% VAT increase in January 2025, which many retailers used as a broader price reset. Those increases never came back down.

CPI smooths this out statistically. Families feel it weekly at the checkout.

In practice, a large family earning in shekels likely experienced closer to 9–12% real inflation.

If that family’s income is USD-based and not shekel-indexed, the combined effect pushes the real pressure closer to a 15-18% increase (!!!!) and possibly more.

That’s why budgets that worked in 2024 suddenly stopped working in 2025, even without lifestyle changes or financial mistakes.

People who were just making it in 2024 were dragged down into debt in 2025, even with the same lifestyle and expenses. 

Once you see the full picture, it finally makes sense.