The Bank of Israel's Monetary Committee reduced the benchmark interest rate by 0.25 percentage points on Tuesday, bringing it down to 3.25%. This marks the third consecutive rate cut within the past year, reflecting the central bank's response to evolving economic conditions.

The decision was made amid a backdrop of moderate inflation and robust economic growth. In recent months, Israel's gross domestic product has expanded rapidly, while inflation has remained relatively subdued. The Consumer Price Index showed no change in June and increased modestly by 0.3% in July. Over the preceding 12 months, inflation stood at 1.5% as of July, positioning it below the midpoint of the Bank of Israel’s target range. Forecasters and inflation expectations for the coming year generally anticipate inflation to remain near this target midpoint.

The committee highlighted that despite ongoing economic uncertainty, Israel's risk premium has stabilized at levels comparable to those before the October 7 massacre. Additionally, the shekel’s exchange rate against major global currencies has not exhibited significant fluctuations during this period.

In its policy statement, the Bank of Israel emphasized its focus on maintaining price stability, supporting economic activity, and ensuring market stability. The central bank indicated that future interest rate decisions will depend on developments in inflation, economic growth, geopolitical risks, and fiscal conditions.

This latest rate cut continues the Bank of Israel’s cautious approach to monetary policy, balancing the need to sustain recovery with vigilance over external and domestic uncertainties.