The Bank of Israel Monetary Committee announced on Monday that the interest rate will be lowered from 4.25% to 4%, Hebrew media reported.
It was the second consecutive decision to lower the rate, after a similar drop in November, in a move that surprised most financial analysts in the country, according to financial outlet Globes.
The Bank of Israel Governor Amir Yaron spoke to the press after the announcement, citing a declining inflation rate, economic resilience in the aftermath of two years of war and the strengthening of the shekel as the main reasons behind the move.
“Since the previous decision, the inflation environment has moderated and, according to forecasters, is expected to decline to the midpoint of the target range as early as the first quarter, among other factors due to the strengthening of the shekel. In the labor market, there are indications of easing supply constraints, reflected in participation rates and the decline in absenteeism among reserve soldiers. In addition, Israel’s risk premium continues to be similar to its level prior to the war,” Globes cited the governor as saying.
Yaron noted that annual inflation stood at 2.4% in November, with December’s CPI expected to record a small rise.
He cautioned however that “despite the decline in uncertainty, economic challenges remain that underscore the need for responsible economic policy to ensure continued financial stability.”
He went on to say that according to the BoI’s Research Department’s forecast, the interest rate is expected to fall to 3.5% by the end of 2026.
