Is Israel's Interest Rate Among the World's Lowest? A Closer Look

Commentator Yinon Magal asserted on his X account that Israel's interest rate is among the lowest globally, excluding Japan, and cited an IMF projection of inflation dropping to 1.8%. Magal shared a segment from the podcast "Shhita Ge'ah" which criticized the government's economic policies under Prime Minister Benjamin Netanyahu, claiming three to four credit rating downgrades occurred during his tenure and that supporters are unaware of the economic situation.

Magal's statement was made in response to criticism of the government's economic management. He argued that while arrogance and ignorance are prevalent, the interest rate is exceptionally low. He also shared a quote from the podcast segment, which referred to his supporters as "a cult of hypnotized people with epoxy brains."

However, a comparison of interest rates reveals a more complex picture. As of September 2026, the Bank of Israel's interest rate stood at 3.25%, following gradual reductions. When accounting for inflation, the real interest rate is approximately 1.7%. This figure is higher than in many Western countries, where real rates in places like the US and UK hover around 0.5% or less, and can be zero or negative in the Eurozone, Canada, and Japan.

The real interest rate, calculated by subtracting inflation from the nominal rate, helps assess the cost of money. In Israel, a 3.25% nominal rate with approximately 1.5% inflation results in a 1.7% real rate. Factors influencing Israel's interest rate include concerns about inflationary pressures, supply constraints, labor shortages, and the government deficit. Therefore, while Israel's nominal rate may not be the highest, the real interest rate indicates that the cost of credit remains significant for households and businesses.