Israel: Central Bank cuts rates again in September
Latest bank decision: At its meeting on 1 September, the Central Bank decided to cut its policy rate by a further 25 basis points to 3.25%, following the 25-basis-point cut in July.
Soft inflation drives move: The Bank chose to ease policy largely because inflation has moderated recently and remains below the midpoint of the Bank of Israel’s 1.0–3.0% target range, providing the space for further monetary easing.
Further easing is possible this year: The Bank did not provide explicit forward guidance. Most of our panelists currently see the Bank on hold for the rest of 2026, though a few panelists see another rate cut given the benign inflation outlook. The policy rate is forecast to stabilize around 3.0% in the longer term.
The next interest-rate decision is scheduled to be published on 21 October 2026.
Panelist insight: EIU analysts—who are at the dovish end of our panel—said:
“We expect further modest rate cuts later in 2026 and in 2027-28, as we forecast that inflation will remain broadly within the 1-3% target range, but we do not expect the central bank to fully unwind the cumulative 465-basis-point tightening cycle of 2022-23. We forecast a […] further reduction […] before the policy rate reaches its terminal rate, leaving it at 2.75% at the end of the 2026-30 forecast period.”