Israel Interest Rate

Central Bank cuts rates in May

Latest bank decision: At its meeting on 25 May, the Central Bank decided to cut its policy rate from 4.00% to 3.75%, following 50 basis points of cuts from October to January.

Benign inflation allows for monetary easing: The Bank decided to cut partly due to modest inflation, which is currently close to the center of the Bank of Israel’s 1.0–3.0% target range. The notable appreciation of the shekel since the March meeting plus the hit to economic activity from conflict with Iran and Hezbollah were likely further reasons to reduce interest rates.

More monetary easing is possible: The Central Bank’s forward guidance was open-ended. Most panelists see 25 to 50 basis points of further rate cuts by the end of 2026, with a minority expecting rates to stay on hold.

Panelist insight: On the outlook, Goldman Sachs’ analysts said: “We believe that the factor that ultimately convinced the BoI to deliver on a cut was the combination of a significant appreciation of the Shekel in recent months and within-target inflation. While we had flagged a close call, we had expected that the BoI would place the largest emphasis on geopolitical uncertainty, as it did in February, and thus chosen to remain on hold. […] We continue to expect the BoI will cut its policy rate until it reaches a terminal rate of 3.25% in Q4.”

How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Israeli interest rate projections for the next ten years from a panel of 12 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Israeli interest rate.

Download one of our sample reports to visualize what a Consensus Forecast is and see our Israeli interest rate projections.

Want to get access to the full dataset of Israeli interest rate forecasts? Send an email to info@focus-economics.com.