Israel: Central Bank holds rates in March
Latest bank decision: At its meeting on 30 March, the Central Bank decided to keep its policy rate at 4.00%, following 50 basis points of cuts from October to January and in line with market expectations.
Bank in wait-and-see mode: The Bank decided to stay on hold partly to evaluate the impact of recent rate cuts, partly because war against Iran and Hezbollah has greatly increased uncertainty over the outlook for economic activity and inflation.
More monetary easing expected: The Central Bank suggested interest rates would fall by between 25 and 50 basis points over the next 12 months. This broadly matches our panelists, who all expect at least one more rate cut before the end of 2026.
Panelist insight: On the outlook, Goldman Sachs’ analysts said:
“Our baseline assumes no economically meaningful geopolitical escalation and, on this basis, we expect the BoI to cut by 25bp in March and in May. The October 7 war’s primary impact on Israel’s economy has been a severe labour shortage, leaving GDP about 5% below its pre-war trend, and we expect the unwinding of this supply constraint to simultaneously enable a period of above-potential growth and further disinflation.”