Bank of Israel cuts interest rate as expected

The Bank of Israel Monetary Committee has decided to cut the bank’s key lending rate by 0.25%, the first reduction for nearly two years.

For the first time in nearly two years, and as expected, the Bank of Israel Monetary Committee has decided to cut the bank’s key interest rate by 0.25% to 4.25%.

The bank thus joins, some would say belatedly, the many countries that have started reducing interest rates in recent months, chief among them the US Federal Reserve, the European Central Bank, and the Bank of England.

The main factors cited in the announcement of the Monetary Committee’s decision are moderation of the annual inflation rate to 2.5%; economic growth below the long term trend, despite a sharp increase in economic activity in the third quarter; a decline in home prices in October for the seventh consecutive month; a decline in Israel’s risk premium; and appreciation of the shekel since the previous interest rate decision by 1.3% against the US dollar, by 2.9% against the euro, and by 2.2% in terms of the nominal effective exchange rate.

The Bank of Israel notes however that the labor market remains tight, and that the ratio between the number of job vacancies and the number of unemployed remains high and the pace of wage increases continues to rise.

Published by Globes, Israel business news – en.globes.co.il – on November 24, 2025.

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