Israel Interest Rate

The Bank of Israel kept the policy rate at 4.5% on February 26th, maintaining levels after a 25 basis point reduction in the last meeting, the first cut in borrowing costs since 2020. Policymakers noted that inflation is easing but highlighted the significant economic impact of the ongoing war on both real economic activity and financial markets. Notably, GDP shrunk by 5.2% quarter-on-quarter in Q4 2023 due to the war, and annual GDP grew by 2%, in line with central bank forecasts. Policymakers highlighted that future interest rate decisions will depend on inflation trends, market stability, economic activity, and fiscal policy.