Bank of Israel Cuts Interest Rates to 3.75% Amid Surging Shekel and Growing Peace Hopes
The Bank of Israel’s Monetary Committee, headed by Governor Amir Yaron, decided on Monday to lower the benchmark interest rate by 25 basis points from 4.0% to 3.75%. The reduction, which aligns with broad market forecasts, comes in response to a heavily strengthening shekel, stable domestic inflation, and mounting diplomatic prospects for a definitive end to the military conflict with Iran.
The decision marks the third interest rate cut since November, with the central bank having paused adjustments during its previous two meetings due to intense geopolitical friction. Policymakers noted that while significant geopolitical uncertainty remains both domestically and globally, recent macroeconomic indicators show a steady recovery in real economic activity.
A primary catalyst for the cut is the dramatic appreciation of the Israeli shekel, which recently surged to a 33-year high, trading at approximately 2.89 against the US dollar. The strong currency has served to naturally cool inflationary pressures, keeping annual inflation steady at 1.9% for the month of April—firmly within the government’s target range of 1% to 3%.
