Bank of Israel Cuts Key Rate to 3.25%

2026-09-01 13:15 By Larissa Caser 1 min. read

The Bank of Israel cut its policy rate by 25 bps to 3.25% at its September 2026 meeting, contrary to market expectations for rates to remain unchanged.

It was the third consecutive rate cut, bringing the policy rate to its lowest level since 2022.

Policymakers noted that inflation had moderated, with the current rate of inflation below the midpoint of the 1%–3% target range, helped by a strong shekel against the dollar.

At the same time, economic activity expanded 15.4% annualized in Q2, the fastest pace in more than two years.

Excluding prodution abroad, growth in the first half of the year was more moderate.

Still, policymakers also noted high uncertainty amid geopolitical tensions, although the risk premium remained broadly stable.

Looking ahead, inflation is expected to remain around the midpoint of the target range, while economic activity appears to have slowed at the start of Q3.

Future decisions will focus on price stability, while providing support for economic activity.



News Stream
Bank of Israel Cuts Key Rate to 3.25%
The Bank of Israel cut its policy rate by 25 bps to 3.25% at its September 2026 meeting, contrary to market expectations for rates to remain unchanged. It was the third consecutive rate cut, bringing the policy rate to its lowest level since 2022. Policymakers noted that inflation had moderated, with the current rate of inflation below the midpoint of the 1%–3% target range, helped by a strong shekel against the dollar. At the same time, economic activity expanded 15.4% annualized in Q2, the fastest pace in more than two years. Excluding prodution abroad, growth in the first half of the year was more moderate. Still, policymakers also noted high uncertainty amid geopolitical tensions, although the risk premium remained broadly stable. Looking ahead, inflation is expected to remain around the midpoint of the target range, while economic activity appears to have slowed at the start of Q3. Future decisions will focus on price stability, while providing support for economic activity.
2026-09-01
Israel Slashes Key Policy Rate to 3.5% as Forecast
The Bank of Israel lowered its policy rate by 25 bps to 3.50% at its July 2026 meeting, as anticipated, delivering a second straight rate cut and bringing the policy rate to its lowest level since 2022. memorandum of understanding between the US and Iran. Policymakers noted that inflation remained around the midpoint of the target range in May, while Israel's risk premium returned to pre-October 2023 levels. Annual inflation held at 1.9% for a third straight month in May, remaining well within the Bank of Israel's 1%–3% target range. Governor Amir Yaron said forecasts show inflation easing to around the midpoint of the target range over the next year, allowing for further policy easing. Meanwhile, the central bank added that recent indicators point to a continued economic recovery following the slowdown at the start of the conflict with Iran, with GDP projected to grow 4.0% in 2026 and 5.5% in 2027.
2026-07-06
Bank of Israel Resumes Easing Cycle as Expected
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.
2026-05-25