Bank of Israel Holds Interest Rate Steady at 3.25% After Three Cuts
Translated & summarized from Maariv by baba
The Bank of Israel has decided to keep its benchmark interest rate unchanged at 3.25%, pausing a streak of three consecutive rate cuts. This decision was influenced by global inflation, energy prices, and geopolitical uncertainty. The central bank's forecast suggests only one more rate reduction in the next year. Mortgage holders will not see further immediate relief on variable-rate loans from this decision.
The story in 5 lines · by baba
- Bank of Israel holds interest rate at 3.25%, ending three consecutive cuts.
- Global inflation, energy prices, and geopolitical uncertainty cited as reasons.
- Forecast suggests only one more quarter-point rate cut in the next year.
- No immediate additional relief for variable-rate mortgage holders.
- Next rate decision scheduled for November 23rd.
The Bank of Israel's Monetary Committee decided to maintain the benchmark interest rate at 3.25%, halting a series of three consecutive reductions. This decision comes amid global inflation concerns, rising energy prices, and geopolitical uncertainty. The central bank had previously lowered the rate in successive steps from May to September, bringing it down from 3.75% to the current level.
The bank cited ongoing global inflationary pressures, driven by increased energy costs and supply chain disruptions, as a key factor in its decision. Despite inflation in Israel standing at 1.6% for the twelve months ending in September, slightly below the target range, the bank highlighted persistent geopolitical tensions as a reason for caution. The shekel has weakened against the dollar and euro since the last rate decision.
Looking ahead, the Bank of Israel's research department forecasts the interest rate to average around 3% in the third quarter of 2027, suggesting only one more quarter-point reduction in the coming year. Inflation is projected to be 1.5% by the end of 2026 and 2.1% by the end of 2027, assuming moderate conflict intensity and continued geopolitical tension.
While the decision means no immediate additional relief for mortgage holders on variable-rate loans, the previous rate cuts' impact on monthly payments remains. The Israel Association of Mortgage Consultants noted that a quarter-point reduction could have saved borrowers approximately 64 shekels per month on a typical mortgage, emphasizing the need for broader national housing policies.
The next interest rate decision is scheduled for November 23rd. The bank's future rate path will depend on inflation trends, economic activity, geopolitical risks, and fiscal developments.
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