Bank of Israel keeps interest rate steady at 4.5% 

The Bank of Israel announced on Monday that it will maintain the benchmark interest rate at 4.5% for the eighth consecutive time, aligning with a 6% prime rate. Despite global trends toward rate cuts, the central bank cited persistent inflation and economic uncertainties as reasons for holding off on any immediate reductions.

Updated projections from the Bank of Israel’s research department suggest a potential decrease in the interest rate to between 4% and 4.25% by the fourth quarter of 2025.

Additionally, Israel’s GDP growth forecast for 2025 has been revised upward to 4%, from a previous estimate of 3.8%. Private consumption is expected to grow by 7.5%, up from 7%. The fiscal deficit is projected to narrow slightly to 4.7% in 2025, an improvement from the earlier forecast of 4.9%.

For 2024, inflation is now expected to reach 3.4%, a slight improvement from the prior estimate of 3.8%. However, inflationary pressures are set to intensify in January due to a series of hikes, including a 1% VAT increase, higher electricity rates (3.5%), water prices (2%), property taxes (up to 5.29%), and essential goods, which could rise by 3%–15%.

The Bank of Israel projects that inflation will surpass 4% early in 2024 but will gradually decrease later in the year.

* Ynet contributed to this article.