The Bank of Israel announced today (Monday) that it has left the interest rate unchanged and it will remain at 4.5%. This is the tenth consecutive time that the Bank of Israel has left the interest rate unchanged.
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The Monetary Committee decided not to lower the interest rate while inflation stands at 3.41%, above the upper range set by the bank, and against the backdrop of uncertainty in the markets.
Among other things, the Bank of Israel justified the decision by announcing the US government's tariff plan last week, which led to sharp declines in the markets, a downward revision of global growth and trade forecasts, and an increase in inflation expectations in the United States.
According to the Bank of Israel, economic activity in the Israeli economy continues to recover moderately against the backdrop of geopolitical developments, the labor market remains tight, and activity in the construction industry is recovering.
"Inflation in the last 12 months has declined to 3.41%, above the upper limit of the target. It is expected to continue moderating towards the target over the coming months," the bank's statement said.
At the same time, the research division updated its macroeconomic forecast. According to the division's assessment, GDP is expected to grow by 3.51% and 4.01% in 2025 and 2026, respectively, lower than the January forecast.
During the forecast period, a recovery in supply is expected, which will contribute to moderating inflation. The bank notes that the interest rate level in the first quarter of 2026 is expected to average 4.0%.
According to the forecast, the new tariff policy announced by the US administration is expected to moderate the volume of global trade and Israeli exports.
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