Bank of Israel cuts interest by 0.25% — first change of direction since April 2022

In a bold move, the Bank of Israel decides to cut interest rates by 25 basis points to 4.5 percent — the first change in trajectory since the bank began steadily raising interest in April 2022.

This amid growing uncertainty over the economic costs and duration of the ongoing war with the Hamas terror group.

“The war is having significant economic consequences, both on real economic activity and on the financial markets,” the central bank says in a statement. “There is a great amount of uncertainty with regard to the expected severity and duration of the war, which is in turn affecting the extent of the impact on activity.”

The policy decision to lower borrowing costs comes after the key lending rate was kept unchanged at 4.75% since July and as Israel is almost three months into the war with Hamas.

To bring down rising inflation, the Bank of Israel has steadily hiked interest rates from a record low of 0.1% in April 2022 to 4.75% in July 2023.