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2026-05-25 21:22:44
[Israel's Central Bank Cuts Rates for Third Time This Year to 3.75%, Shekel Hits 33-Year High to Suppress Inflation] ⑴ The Bank of Israel cut its benchmark interest rate from 4% to 3.75% on Monday, marking its third rate cut in six months. The bank had previously cut rates in November and January, but held them steady in subsequent decisions due to the conflict with Iran and concerns about supply-driven inflation. ⑵ The annualized inflation rate stabilized at 1.9% in April, within the target range of 1% to 3%, but policymakers remain vigilant about the potential for geopolitical developments and their impact on economic activity, energy prices, and higher national spending to trigger renewed price pressures. ⑶ The Bank of Israel stated that the shekel's exchange rate against the dollar is at a 33-year high, which helps to curb inflation. Exporters have called for the central bank to cut rates or intervene in the foreign exchange market. The ceasefire agreement reached on April 8, following the US-Israel airstrikes on Iran on February 28, remains fragile. ⑷ From a trading psychology perspective, the central bank's statement noted that "significant geopolitical uncertainty remains," and that the war with Iran "has impacted real economic activity, and the latest data shows a recovery." The Monetary Policy Committee's policy focuses on price stability, supporting economic activity, and market stability. The future path of interest rates will be determined based on inflation developments, economic activity, geopolitical uncertainties, and fiscal developments. Central bank staff previously predicted two more rate cuts by early 2027, bringing the policy rate down to 3.5%.
