The Bank of Israel kept its benchmark interest rate unchanged at 3.25% at its latest meeting, maintaining it at the lowest level since 2022 after three consecutive cuts. Annual inflation came in at 1.6%, below the midpoint of the central bank’s 1%–3% target range. Policymakers noted that inflation has eased, supported in part by the strength of the shekel against the US dollar, and they expect it to remain close to the midpoint of the target band.
The Bank also highlighted significant uncertainty stemming from ongoing geopolitical tensions, even though the country’s risk premium has remained broadly stable. Economic activity appears to have softened at the start of the third quarter, following a strong 15.4% annualized expansion in the second quarter. Looking ahead, the Bank of Israel indicated that its policy decisions will continue to prioritize price stability while also seeking to support economic activity.