Bank of Israel holds rate at 3.25%

Several factors drove the decision to pause, the most important of which is the shekel's recent weakening, which has raised concerns among monetary policymakers. The Bank of Israel intervened in the foreign-exchange market during the year, purchasing approximately $800 million this past May to moderate the shekel's rapid strengthening, but the trend has since reversed.

Ongoing political and security uncertainty is another factor. Though the Israeli economy recorded 6.2% growth compared to the end of 2025, when activity by Israeli companies outside the country is neutralized, the increase in domestic activity was more moderate at 3.8%. The sharp recovery in the economy provides additional justification for waiting before cutting further.

Market analysts estimate that another rate cut to 3% remains possible in the coming months if economic conditions permit. The key factors that will determine future decisions are inflation trends, shekel stability, and the security situation.

The Bank of Israel has made three consecutive rate cuts this year, bringing the rate down from 4% at the start of the year to the current 3.25%. Each quarter-point reduction saves approximately 66 shekels per month on the repayment of an average 450,000-shekel mortgage on a prime track over 25 years.