Bank of Israel keeps interest rate unchanged at 3.25%

The Bank of Israel leaves interest rates on hold at 3.25% as it sees the economy growing at a faster pace this year and in 2027, citing a weaker shekel and stabilization of geopolitical risk.

“Uncertainty remains high in view of the geopolitical tensions,” the central bank says in a statement. “However, during the reviewed period, Israel’s risk premium remained at levels similar to those prior to October 7, 2023, and the shekel depreciated.”

“Current indicators of economic activity show continued growth following the rapid second quarter recovery from Operation Roaring Lion,” the central bank adds.

In its last decision in September, the central bank reduced borrowing costs to 3.25% from 3.50%, after trimming rates in July, May and January this year.

The central bank now expects the economy to grow by 5.6% this year, up from its previous forecast of 4%. In 2027, the pace of growth is expected to pick up to 7.5% versus the 5.5% forecasted last time.

“Much of the revision reflects the large expected contribution of production abroad by Israeli firms,” the central bank says.