The Bank of Israel’s Monetary Committee cut the interest rate by 25 basis points to 3.25% on September 1, citing moderating inflation and more moderate underlying activity despite rapid headline growth. The rate has fallen from 4.5% in September 2025 through 25-basis-point cuts in November, January, May, July and September. Annual inflation was 1.5% in July, below the midpoint of the target range, while second-quarter GDP was 6.2% above its fourth-quarter 2025 level in annual terms, or 3.8% excluding Israeli companies’ production abroad. The labor market remained tight and business credit continued to expand rapidly, while arrears remained low. The exchange rate was virtually unchanged over the reviewed period and Israel’s risk premium remained near levels prevailing before October 7, 2023. Middle East geopolitical tensions pushed energy prices sharply higher and disrupted global supply chains, although the global Purchasing Managers Index continued to indicate economic expansion. The Committee said the rate path will depend on inflation, economic activity, geopolitical uncertainty and fiscal developments.
2026-09-01Bank of Israel
Bank of Israel Cuts Interest Rate by 25 Basis Points to 3.25%
The Bank of Israel cut its interest rate by 25 basis points to 3.25% on September 1, citing moderating inflation and more moderate underlying activity despite rapid headline growth. The rate path will depend on inflation, economic activity, geopolitical uncertainty and fiscal developments.