Central Bank leaves rates unchanged in August

Latest bank decision: At its meeting on 20 August, the Central Bank decided to leave its policy rate unchanged at 4.50%, where it has been since the start of 2024.

Stubborn inflation drives hold: The Central Bank likely judged it was premature to cut rates given that the labor market is tight, and that both headline and core inflation are hovering above the Bank’s 1.0–3.0% target range. On the flipside, hiking rates was not warranted either given that headline inflation should move back in range in the coming months.

Monetary easing still the baseline scenario: The Central Bank provided no explicit forward guidance on the future direction of interest rates. Most of our panelists expect rate cuts in 2025, of either 25 or 50 basis points. However, one panelist sees rates on hold. The balance of probabilities appears to be skewed towards fewer or no rate cuts this year given stubborn price pressures.

Panelist insight: On the outlook, Goldman Sachs’ analysts said: “The combination of inflation likely returning to the target range next month and the BoI's assessment that growth is below potential point to the BoI recommencing a cutting cycle relatively soon. That said, the BoI might prefer to maintain its cautious stance for the time being if the conflict in Gaza escalates in line with recent media reports – the BoI has been sensitive to elevated geopolitical uncertainty since October 7 and has repeatedly cited this as a reason not to cut. We maintain our forecast for the next cut in November.”

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 11 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.