FX.co ★ Israel Delivers First Rate Cut in Nearly Two Years

The Bank of Israel has reduced its benchmark interest rate by 25 basis points, bringing it down to 4.25% during its November session. This decision marks the first rate decrease in almost two years, aligning with market expectations. Policymakers pointed to a slowdown in inflation but stressed the need for caution regarding any additional rate cuts. This adjustment occurs as major central banks globally are already easing monetary policies and in light of the recent US-facilitated ceasefire between Israel and Hamas. Inflation for October was recorded at 2.5%, maintaining its position within the official target range of 1–3% for the third consecutive month. Analysts predict a modest increase in inflation towards the end of the year before it declines and stabilizes close to the middle of the target range. Economic activity showed a marked improvement in the third quarter, with GDP growing at an annual rate of 12.4%, although overall output still lags behind its long-term trend. The labor market continues to show signs of tightness.