The Bank of Israel’s Monetary Committee lowered the interest rate to 3.5% on July 6, 2026, citing inflation that remained around the midpoint of the target range, continued recovery in activity after the March-April confrontation with Iran, and still-high geopolitical uncertainty despite lower energy prices following the United States-Iran memorandum of understanding. The Committee said policy remains focused on price stability, support for economic activity, and market stability, with the rate path to depend on inflation, activity, geopolitical uncertainty, and fiscal developments. May consumer prices fell 0.3% on the month, leaving annual inflation at 1.9%, while the Research Department projects GDP growth of 4% in 2026 and 5.5% in 2027; the labor market remained tight, with wages up 6.8% in March-May from a year earlier. The shekel depreciated during the review period with high volatility, and the central bank said Israel’s risk premium was near its pre-October 2023 level. Globally, the statement pointed to a sharp drop in oil prices and easing geopolitical tensions, though uncertainty remains high. The next interest rate decision will be published on September 1, 2026.
Bank of Israel2026-07-06
Bank of Israel Lowers Interest Rate to 3.5%
The Bank of Israel cut its policy rate to 3.5% on July 6, 2026, citing inflation near the midpoint of the target range, a continued recovery in activity after the March-April confrontation with Iran, and still-elevated geopolitical uncertainty despite lower energy prices. It said the policy path will depend on inflation, activity, geopolitical uncertainty and fiscal developments, with annual inflation at 1.9%, projected gross domestic product growth of 4% in 2026 and 5.5% in 2027, and the next rate decision due on September 1, 2026.