Bank of Israel Cuts Interest Rate for Third Consecutive Time

The Bank of Israel's Monetary Committee announced on Tuesday its decision to lower the benchmark interest rate by 0.25%, bringing it to 3.25%. This marks the third consecutive rate cut, following similar reductions in recent months. The decision was made in response to moderating inflation, which currently stands at 1.5%, within the bank's target range. This move is expected to further decrease monthly payments for mortgages and loans, with an average mortgage payment anticipated to drop by approximately 65 shekels.

Last month, the bank implemented a 0.25% rate cut, setting the rate at 3.5%, as inflation had stabilized at 1.9%. Despite pressure from various economic sectors, particularly exporters, advocating for a more significant reduction, the committee opted for a modest 0.25% cut.

In May, the interest rate was lowered by 0.25% to 3.75%, attributed to declining inflation and a strengthening shekel. Prior to these cuts, in March, the bank maintained the interest rate at 4%. This decision was made despite inflation being within the target range of 2%, due to uncertainties surrounding the conflict with Iran and Lebanon, and concerns about potential inflation spikes, including rising fuel prices.

Similarly, in February, the rate remained unchanged at 4%, despite moderating inflation, amidst heightened tensions between the United States and Iran. At that time, Finance Minister Smotrich criticized Governor Amir Yaron's decision, calling it "a wrong decision, not supported by the macro data of the Israeli economy."