The Bank of Israel Monetary Committee lowered the policy interest rate to 4 percent, citing a moderating inflation environment alongside continued expansion in economic activity and some easing in labour supply constraints. November’s Consumer Price Index fell 0.5 percent, bringing annual inflation to 2.4 percent, while one-year-ahead inflation expectations were slightly below the midpoint of the target range and longer-term expectations remained near the midpoint. Since the previous decision, the shekel strengthened 3.1 percent against the US dollar, 1.5 percent against the euro, and 2.2 percent in nominal effective terms. The Committee highlighted risks of a renewed acceleration in inflation from geopolitical developments, demand pressures alongside supply constraints, and fiscal developments. The Research Department revised its forecast under an assumption that the ceasefire will be maintained, projecting GDP growth of 2.8 percent in 2025 and 5.2 percent in 2026, with inflation of 1.7 percent in 2026 and 2 percent in 2027. The minutes of the monetary discussions will be published on January 19, 2026, and the next interest rate decision is scheduled for February 23, 2026.
Bank of Israel 2026-01-05
Bank of Israel lowers policy rate to 4% as inflation moderates
The Bank of Israel Monetary Committee reduced the policy interest rate to 4 percent due to moderating inflation and economic expansion, while noting potential inflation risks from geopolitical and fiscal factors. November's Consumer Price Index decreased by 0.5 percent, with annual inflation at 2.4 percent, and the shekel appreciated against major currencies.