Bank of Israel Cuts Interest Rates Again, Marking a Third Reduction This Year

The Bank of Israel's Monetary Committee announced Monday evening that it has decided to lower the benchmark interest rate by 0.25 percentage points, bringing it to 3.5%. This marks the second consecutive rate cut and the third since the beginning of the year.

The decision, made under the leadership of Bank of Israel Governor Amir Yaron, comes as annual inflation remained stable at 1.9% in May, the midpoint of the government's official inflation target.

Bank officials said one of the key factors behind the move was the signing of the memorandum of understanding between the United States and Iran. According to the bank, the agreement contributed to a sharp drop of about 30% in global oil prices, easing geopolitical tensions and lowering Israel's risk premium.

At the same time, the bank stressed that uncertainty in the region remains high and that future interest rate decisions will depend on fiscal and security developments.

Alongside the announcement, the Bank of Israel's Research Department raised its growth forecasts for the Israeli economy, assuming there is no renewed conflict with Iran and that fighting in Lebanon continues to subside.

Under the updated forecast, Israel's gross domestic product is expected to grow by 4% in 2026 and 5.5% in 2027.