Bank of Israel Holds Interest Rates at 3.25 Percent

The Bank of Israel Monetary Committee maintained the benchmark interest rate at 3.25% on October 21, 2026. This decision follows a series of three consecutive rate cuts implemented in May, July, and September. The central bank cited high geopolitical uncertainty and the proximity of the general election, scheduled for one week later, as key factors in the hold.

Annual inflation stood at 1.6% in September, which falls within the bank's target range of 1% to 3%. The bank's Research Department increased its macroeconomic forecasts, projecting GDP growth of 5.6% for 2026 and 7.5% for 2027. However, officials noted these figures are skewed by the activities of Israeli companies operating abroad; domestic growth is projected at 3.4% and 5.1% for those respective years.

Alongside the rate decision, the bank issued a fiscal warning to the government. It cautioned that increasing the defense budget without corresponding fiscal adjustments could expand the deficit and potentially reignite inflation.