Bank of Israel Cuts Rate to 3.75% as Shekel Hits 33-Year High
Updated
Updated · The Jerusalem Post · May 25
Bank of Israel Cuts Rate to 3.75% as Shekel Hits 33-Year High
4 articles · Updated · The Jerusalem Post · May 25
A third cut in six months lowered Israel's benchmark rate by 25 basis points to 3.75%, after the central bank had paused its last two meetings.
April inflation held at 1.9% within the 1%-3% target, and the shekel's sharp appreciation against the dollar gave policymakers room to ease.
The Bank of Israel still warned that geopolitical risks remain high, saying the Iran war hurt real activity even as recent data point to a recovery.
A ceasefire with Iran has held since April 8 but remains fragile, leaving future rate moves tied to inflation, growth, fiscal pressures and security developments.
Bank staff in March projected two cuts by early 2027 that would bring the policy rate down to 3.5%.
As war reshapes Israel's economy, are traditional interest rate tools obsolete for managing its unique mix of crisis and growth?
With young Israelis increasingly saving in US dollars, is the shekel's local dominance facing a long-term challenge from within?
Israel’s 2026 Rate Cut: Navigating Inflation, War Risks, and Economic Recovery
Overview
The Bank of Israel is expected to announce an interest rate cut on May 25, 2026, guided by Governor Amir Yaron’s forward-looking projections for rates to reach 3.5%–3.75% by early 2027. This move is a strategic step toward long-term policy goals and reflects a commitment to gradual, cautious adjustments. The decision is supported by stable inflation, with the annual rate at 1.9% in April 2026, unchanged from March. Together, these factors show the central bank’s careful approach to supporting economic stability while responding to evolving economic conditions and future targets.