- Decision
- Maintain
- Rate change
- 0 bps
- interest rate
- 3.25%
The Bank of Israel’s Monetary Committee held its interest rate at 3.25%, with inflation below the target-range midpoint and economic activity continuing to grow amid high geopolitical uncertainty, following reductions from 4.25% in November 2025, including a 25-basis-point cut in September 2026. Annual inflation stood at 1.6% in September, and forecasters expect it to converge toward the target-range midpoint at the beginning of 2027. The Research Department projected gross domestic product growth of 5.6% in 2026, with much of the forecast revision reflecting production abroad by Israeli firms. Excluding that production, which better reflects domestic activity, growth was projected at 3.4%. Business credit continued to expand rapidly. The shekel depreciated by 3.1% against the US dollar since the previous interest rate decision. Globally, higher energy prices and supply-chain disruptions increased inflationary pressures. The committee said the interest rate path would depend on inflation, economic activity, geopolitical uncertainty and fiscal developments, while policy remained focused on price stability, supporting economic activity and market stability.
Rate evolution
From July 2025 to September 2026, the Bank of Israel reduced the policy rate by 125 basis points to 3.25 percent, after holding at 4.5 percent through September, cutting twice as disinflation became more established, pausing at 4.0 percent amid renewed conflict, and then resuming easing. The early holds reflected inflation still above or near the top of the target range, high inflation volatility, a tight labor market, and only moderate recovery in activity, all against high geopolitical uncertainty, with the Committee repeatedly citing risks from geopolitical developments, demand rising alongside supply constraints, worsening global terms of trade, and later fiscal developments. As inflation moved into the target range, expectations stayed around the midpoint, the shekel appreciated, and Israel’s risk premium declined, the Committee cut in November and January even as it noted a sharp rebound in activity, persistent labor tightness, and firm wage growth.
In subsequent decisions, the Committee held in February and March as uncertainty around Iran resurfaced, energy prices lifted the inflation environment, and housing and labor supply pressures persisted, then cut in May and July as inflation stayed around the midpoint, risk premia returned near prewar levels, and activity recovered after Operation Roaring Lion, with July also reflecting lower energy prices and more moderate global geopolitical tension following the memorandum of understanding signed between the United States and Iran. On September 1, the Committee cut by a further 25 basis points as inflation moderated below the midpoint, while noting that growth partly reflected recovery from Operation Roaring Lion, activity excluding production abroad by Israeli firms was more moderate, and labor market tightness and high geopolitical uncertainty persisted. On October 21, 2026, it held the policy rate at 3.25 percent as annual inflation stood at 1.6 percent in September and activity continued to grow, while flagging high geopolitical uncertainty, shekel depreciation, significant labor supply constraints, and rising global inflationary pressures from higher energy prices and supply chain disruptions, and reiterating that the rate path would depend on inflation, economic activity, geopolitical uncertainty, and fiscal developments.