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Current Price Freeze on Basic Commodities to Remain in Effect

Premier Menachem Begin prevailed on his Cabinet yesterday to maintain the current freeze on the prices of basic commodities subsidized by the government for the time being. That decision and the announcement by the Central Bureau of Statistics yesterday that the cost-of-living index rose by only 3.5 percent in June compared to 4.8 percent in May and a record 8.7 percent in April, promised some respite for harried consumers.

The Treasury expressed satisfaction with the decline of the c.o.l. rate for the second consecutive month, attributing it to the government’s restraining efforts and the slower rise of seasonal factors. But economic analysts were skeptical. They said the slower rise in the price index during the last two months was due mainly to seasonal drops in the prices of certain items, chiefly fruit and vegetables and the government’s delay in raising prices which, nevertheless, is inevitable.

Begin insisted on the delay to cool down inflation. His economic ministers on the other hand, had pressed for the reduction or elimination of price subsidies for basic commodities which the Treasury can ill afford. This would lead to sharp price increases. As a result of yesterday’s decision, the prices of such items as fuel and frozen meat will remain stable for the time being. Gasoline now sells at about $2 a gallon.

Further discussions of prices will take place soon, possibly this week and another chain of increases is considered likely. The July consumer price index is expected to rise inasmuch as it will include updated costs of housing which are calculated every three months. The government’s basic program calls for an adjustment of prices to the world market levels while compensating the needy. The premise is to shift subsidies from commodities to the low income consumer.

A further acceleration of inflation is expected to result from end of season sales next month. But the Treasury hopes to keep prices down as much as possible through August when the c.o.l. payments, due salaried workers in October, are calculated. The price index now stands at 330.3, based on the 1976 average of 100. Prices have risen by 68 percent in the last 12 months. If inflation continues at the rate of the first half of 1979, the inflation rate will reach 80 percent for the year.

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