The Bank of Israel reduced its benchmark policy rate by 25 basis points to 4.00% on 5 January 2026, a move most economists had not expected. The decision was the second consecutive reduction in the policy rate.
The latest move came against a backdrop of easing price pressures, with consumer prices in November 2025 declining 0.5% on a monthly basis and the annual inflation rate falling to 2.4%, placing it within the Bank of Israel's target range of 1 to 3 per cent.
INFLATION AND RATE FORECAST
At 4.00%, the policy rate remains above annual inflation of 2.4%. The Bank of Israel's Research Department forecast that the policy rate would fall to 3.5% by the end of 2026, assuming a stable geopolitical environment and a sound fiscal situation.
Bank news that matters, every weekday.
Follow The Global Banker on LinkedIn