BOI Interest Rate in Israel
The BOI Interest Rate ended 2022 at 3.25%, up from the 0.10% end-2021 value and higher than the rate of 1.00% a decade earlier. For reference, the average BOI Interest Rate in Middle East & North Africa was 5.80% at the end of 2022. For more interest rate information, visit our dedicated page.
Israel Interest Rate Chart
Israel Interest Rate Data
|BOI Interest Rate (%, eop)||0.25||0.25||0.10||0.10||3.25|
|10-Year Bond Yield (%, eop)||2.27||0.96||0.77||1.28||3.58|
Central Bank stays put in October
At its 23 October meeting, the Bank of Israel (BOI) kept the policy rate at 4.75%, following 465 basis points of tightening from early 2022 through to May this year. The Bank also commented that it had activated a program to sell foreign exchange and to provide liquidity in financial markets in the wake of the conflict with Hamas.
The decision to keep rates unchanged was driven by declines in headline and core inflation in recent months, and by one-year inflation forecasts that were within the Central Bank’s target range of 1.0–3.0%. Together with the weaker economic outlook due to the war with Hamas, this meant that further rate hikes were not warranted. Conversely, the Bank likely judged that any rate cuts were premature, given headline and core inflation were still above target, the shekel had depreciated to a multi-year low in recent weeks, and that the duration and economic impact of the conflict were still unclear.
Looking forward, the BOI removed the previous meeting’s guidance about possible future rate hikes, and stated that monetary policy would be guided by a desire to stabilize the markets and reduce uncertainty. For now, our Consensus is for rates to stay broadly unchanged this year before dipping in 2024, though an intensification of the conflict could spur rate cuts.
Giving their take on the monetary policy outlook, analysts at Goldman Sachs said: “While we think Israel's financial stability risks and economic vulnerabilities are lower than during previous episodes of escalating tensions and conflict — owing to Israel's stronger balance of payment position, large stock of FX reserves and likely significant overseas inflows — we nevertheless think the Bank of Israel will maintain a cautious policy stance. Instead, we think more meaningful economic support is likely to be provided by fiscal policy at this stage, whereas monetary policy easing would require the BoI to be confident that exchange rate developments have stabilized.”
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 8 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.
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