Israel's Central Bank Holds Interest Rate Steady Amid Inflation Drop
Translated & summarized from NEWSru Israel by baba
The Bank of Israel maintained its interest rate at 3.25% on October 21, despite inflation falling to 1.6% in September. The decision was influenced by high economic uncertainty due to geopolitical tensions and potential conflict. The central bank also updated growth forecasts and noted ongoing labor shortages and declining housing prices. Future rate adjustments will depend on inflation, economic, geopolitical, and fiscal factors.
The story in 6 lines · by baba
- Bank of Israel kept its interest rate at 3.25% on October 21.
- Annual inflation in Israel dropped to 1.6% in September.
- Geopolitical uncertainty and potential conflict influenced the rate decision.
- The Israeli shekel lost 2.2% against major currencies.
- GDP growth forecasts for 2026 and 2027 were revised upwards.
- Housing prices have decreased by 1.8% over the last 12 months.
The Monetary Committee of the Bank of Israel decided on October 21 to maintain the benchmark interest rate at 3.25% annually, despite a recent decrease in inflation. The central bank announced that annual inflation in September was 1.6%, falling slightly below the lower end of its 1-3% target range. However, the bank cited ongoing high economic uncertainty due to the tense geopolitical situation and the potential for renewed military conflict as reasons for its decision. Since the last rate announcement, the Israeli shekel has depreciated by 3.1% against the US dollar and appreciated by 0.3% against the euro, resulting in a 2.2% overall loss in value against major trading partners' currencies. The Bank of Israel also revised its economic growth forecasts, projecting GDP to expand by 5.6% in 2026 and 7.5% in 2027. A significant portion of this projected growth is attributed to the overseas production activities of Israeli companies. Excluding this factor, domestic economic growth is estimated at 3.4% for 2026 and 5.1% for 2027. The bank noted that the labor market remains tight, with a labor shortage continuing to hinder economic activity. Concurrently, housing prices are declining, with a 0.6% decrease in July-August and a 1.8% drop over the past 12 months. Future interest rate decisions will be contingent on inflation dynamics, economic conditions, the geopolitical climate, and government fiscal policy, the Bank of Israel stated.
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