Bank of Israel Holds Benchmark Rate at 3.25%, Pausing After Three Straight Cuts a Week Before the Election; 2026 Growth Forecast at 5.6%
JERUSALEM — The Bank of Israel left short-term interest rates unchanged on Wednesday, October 21, after three successive cuts, opting for a pause ahead of a general election next week despite stable inflation, Reuters reported. The central bank held its benchmark rate at 3.25%. It had cut rates last November and January before pausing due to the conflict with Iran and fears of a spike in supply-driven inflation. It then resumed cuts in May, July and September.
The annual inflation rate edged up to 1.6% in September — well within the bank's 1% to 3% target range — from 1.5% in August. "Uncertainty remains high in view of the geopolitical tensions," the bank said in a statement. "However, during the reviewed period, Israel's risk premium remained at levels similar to those prior to October 7, 2023, and the shekel depreciated." All 15 economists polled by Reuters had expected no move.
According to the staff forecast of the bank's research department, GDP is expected to grow by 5.6% in 2026 and by 7.5% in 2027. Much of these upward revisions reflect the large expected contribution of production abroad by Israeli firms, the bank said. Excluding production abroad, growth was forecast at 3.4% in 2026 and 5.1% in 2027.
Israel holds a general election on October 27. A Reuters poll preview published on October 20 said there have been five 25-basis-point cuts in the current easing cycle, which began last November, taking the benchmark rate to a four-year low of 3.25%; it also reported that the economy grew at an annualized 15.4% in the second quarter while the shekel weakened to a nine-month low against the US dollar.
Source: GSM · USA (original Chinese edition)
Photo: 图：以色列银行（以色列央行）位于耶路撒冷的总部大楼（资料图）。照片：Uri Farkash，CC BY-SA 4.0，经Wikimedia Commons。The Bank of Israel headquarters in Jerusalem (file photo). Photo: Uri Farkash, CC BY-SA 4.0, via Wikimedia Commons.
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