The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has cut the interest rate 0.25% to 3.5%, as most economists had expected, due to the strength of the shekel, stable prices with inflation well below the annual target range upper limit of 3%, and the fall in the risk premium for Israel,
This is the second successive interest rate cut, after the Bank of Israel cut the rate by 0.25% at its most recent meeting in late May and its fourth rate cut since November 2025.
Giving the reasons for making its decision, the Bank of Israel noted that the memorandum of understanding signed between the US and Iran has led to a decline in energy prices and a moderation of the global geopolitical tension, but the level of uncertainty remains high.
The Bank of Israel has cut its forecast for inflation in 2026 from 2.2% to 1.8% and sees the interest rate at 3% in 12 months time.
The Bank of Israel added, "The inflation rate in May remained stable around the midpoint of the target range, and the risk premium is similar to before October 2023. Overall during the reviewed period, the shekel depreciated with high volatility."
The Bank of Israel Research Department sees GDP growing by 4% in 2026 and by 5.5% in 2027. "The Research Department’s assessment is that if the defense budget is not increased beyond the buffer reserved in the State budget, the government’s budget deficit is expected to be 4.9% of GDP in 2026 and 4.2% of GDP in 2027."
Published by Globes, Israel business news - en.globes.co.il - on July 6, 2026.
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