The Bank of Israel published its Research Department staff macroeconomic forecast for 2025–2026, built around a baseline scenario in which the fighting in Gaza ends in the first quarter of 2026. Under that scenario, GDP is projected to grow by 2.5% in 2025 and 4.7% in 2026, inflation is expected at 3.0% in 2025 and 2.2% in 2026, and inflation over the four quarters ending in the third quarter of 2026 is forecast at 2.4%. The average Bank of Israel interest rate in the third quarter of 2026 is forecast at 3.75%, implying a gradual reduction consistent with inflation converging to the midpoint of the target range.
Bank of Israel 2025-09-29
Bank of Israel staff forecast projects 2.5% GDP growth in 2025 and a 3.75% policy rate by Q3 2026 if Gaza fighting ends in Q1 2026
The Bank of Israel's Research Department released its macroeconomic forecast for 2025–2026, projecting GDP growth of 2.5% in 2025 and 4.7% in 2026, with inflation at 3.0% and 2.2% respectively, assuming the Gaza conflict ends by Q1 2026. The average interest rate is expected to be 3.75% in Q3 2026, aligning with inflation targets.