Israel Interest Rate

The Bank of Israel kept its benchmark interest rate unchanged at 4.5% for the 13th straight meeting on August 20, citing signs of a rapid recovery after the sharp but temporary hit from Operation Am Kalvi. GDP contracted 3.5% in annualized terms in the second quarter, though activity excluding the operation’s impact remained positive but below trend. Inflation eased to 3.1% in July, just above the central bank’s 1–3% target range, with expectations pointing to a return within bounds in the coming months. Policymakers flagged risks from persistent geopolitical uncertainty, supply constraints, and weak global trade. The labor market has largely returned to pre-operation conditions, while the shekel weakened modestly, and fiscal deficits remain elevated at 4.9% of GDP. The Bank of Israel adopts a cautious stance, keeping rates steady as it monitors economic recovery, inflation, and geopolitical risks.