Bank of Israel Cuts Rates to Four-Year Low to Bolster Postwar Economic Rebound | Israel Politics Post
Bank of Israel Cuts Rates to Four-Year Low to Bolster Postwar Economic Rebound
Governor Amir Yaron's 25-basis-point cut brought rates to 3.25 percent, the lowest since the pandemic era, as the bank tries to balance a cooling inflation picture against exporters squeezed by a strengthening shekel.
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By Israel Politics Post Staff·Published
A largely empty pedestrian mall in central Jerusalem · Source: Yonatan Sindel/Flash90, via The Times of Israel
The Bank of Israel cut its benchmark interest rate by 25 basis points to 3.25 percent, the lowest level in nearly four years, in a bid to support the economy's recovery from months of military operations, The Times of Israel reported. Governor Amir Yaron's latest cut follows earlier reductions in July, May and January of this year.
Annual inflation eased to 1.5 percent in July, a five-year low that sits comfortably within the central bank's target range. Even so, the bank cautioned that strong first-half growth figures only "partly reflect recovery" from the military campaign against Iran that began in late February, suggesting the rebound remains fragile.
The shekel's roughly 10 percent appreciation against the dollar over the past year has cut import costs and helped tame inflation, but it has squeezed exporters' competitiveness in the process. Manufacturers accused Yaron of "doing too little too late," warning the currency's strength threatens growth, while the Israel Manufacturers' Association welcomed the cut but pushed for a "more rapid path of rate cuts" to counter the shekel's bite into profitability and investment.
Economist Gali Ingber of the College of Management described the decision as a "dovish stance, providing a lifeline to the local economy" amid ongoing "geopolitical turmoil" and "prolonged uncertainty." The central bank's next rate decision is scheduled for October 21, just days before the national election.
