Israeli Shekel Strengthens Slightly as Inflation Data Shows Cooling Economy

The US dollar experienced a slight decline against the Israeli shekel, dropping 0.2% to trade below 2.99 shekels following the release of June inflation data. The euro also fell by a similar margin, trading above 3.42 shekels. Globally, the dollar index stabilized at 100.5 points after two days of declines, while the euro and British pound remained steady against the dollar.

The currency movements come amid ongoing US airstrikes in Iran, targeting the country’s military capabilities to threaten shipping in the Strait of Hormuz. Meanwhile, Israel’s Central Bureau of Statistics reported that the June Consumer Price Index remained unchanged month-over-month, defying expectations of a 0.1% drop. Annual inflation decreased to 1.6% in June from 1.9% in May.

Housing prices in Israel fell by 1% between April and May compared to the previous two months, marking the sharpest bi-monthly decline in about eight years. Year-over-year, prices dropped 2% from April-May 2025 to April-May 2026. This downward trend in housing costs began in March 2025 and has largely continued, with only two months showing increases.

Economic analyst Adrian Pilot highlighted the significance of the low inflation figure, stating it indicates a continued cooling of Israel’s inflation environment. He noted that the Bank of Israel had already lowered interest rates twice this year, including a cut to 3.5% on July 6. With inflation at 1.6%, the real interest rate stands at approximately 1.9%, still high compared to other developed economies, despite a 3.3% GDP contraction in the first quarter due to the "Roaring Lion" military operation.

Pilot concluded that the June inflation data gives the Bank of Israel governor and monetary committee the green light to continue easing monetary policy at their next meeting on August 31, moving toward a neutral interest rate around 3%, as forecasted by the Bank’s research division.