The Bank of Israel Monetary Committee, headed by Governor Prof. Amir Yaron, has cut the interest rate by 0.25% to 3.25%. This is the third successive interest rate cut, after the Bank of Israel cut the rate by 0.25% at each of its two most recent meetings in early July and late May. This is the fifth rate cut since November 2025. Economists had been split over whether the Bank of Israel would cut the rate or leave it unchanged.
The Bank of Israel said that the Monetary Committee’s policy is focusing on price stability, support for economic activity, and stability of the markets. The interest rate path will be determined in accordance with the development of inflation, economic activity, geopolitical uncertainty, and fiscal developments.
The Bank of Israel said that one of the aims of the rate cut is "to support economic activity." The Bank of Israel notes that, "National Accounts data for the second quarter of 2026 show that GDP was 6.2% higher than in the fourth quarter of 2025 (in annual terms). The figures partly reflect recovery of the economy from the impact to activity during the first quarter in view of Operation Roaring Lion (the military operation against Iran). However, net of production abroad by Israeli companies, GDP in the second quarter was 3.8% higher than in the fourth quarter of 2025 (in annual terms).
On inflation, which led to rate hikes in 2022, the Bank of Israel said, "Inflation has moderated in recent months, and its rate during the reviewed period was lower than the midpoint of the target range."
But the Bank of Israel warned about ongoing geopolitical tensions, "Uncertainty remains high in view of the geopolitical tensions. However, during the reviewed period, Israel’s risk premium remained at levels similar to those prior to October 7, 2023, and the exchange rate remained virtually unchanged."
Published by Globes, Israel business news - en.globes.co.il - on September 1, 2026.
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