Bank of Israel Resumes Easing Cycle as Expected

2026-05-25 13:28 By Luisa Carvalho 1 min. read

The Bank of Israel cut its benchmark interest rate by 25 bps to 3.75% during its May 2026 meeting, as widely anticipated, after keeping it unchanged in February and January.

The decision was driven by a strong shekel, contained inflation, and prospects of a potential agreement to end the war with Iran, despite still significant geopolitical uncertainty.

The central bank noted that “inflation in Israel remains around the midpoint of the target.” The headline inflation stood at 1.9% in April 2026, unchanged from March and staying within the Bank of Israel’s 1%–3% target band for nine consecutive months.

Meanwhile, policymakers noted that GDP contracted 3.3% at an annual rate in Q1, reflecting the impact of Operation Roaring Lion, but the decline was smaller than expected and less severe than during Operation Rising Lion in June 2025.

Current indicators of economic activity point to a recovery.

The central bank said future rates will be guided by both domestic and external factors.



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