Central Bank cuts rates in November

Latest bank decision: At its meeting on 24 November, the Central Bank decided to cut its policy rate from 4.50% to 4.25%, marking the first cut since the start of 2024.

Inflation pullback drives decision: Headline and core inflation have pulled back notably since the middle of the year, with both now sitting within the Bank of Israel’s 1.0–3.0% target range; this likely provided the space for monetary easing. Falling house prices and real estate transactions plus the strengthening of the shekel since the prior meeting in September likely further motivated the Bank’s decision.

More monetary easing expected: The Central Bank provided no explicit forward guidance on the future direction of interest rates. All of our panelists expect further rate cuts before the end of 2026, of between 50 and 125 basis points.

Panelist insight: On the outlook, Goldman Sachs’ analysts said: “In line with our expectations, the BoI did not deliver any guidance for the future path of the policy rate, instead continuing to emphasise data dependence. […] Our own forecast expects the BoI to continue cutting, but not necessarily at consecutive meetings – instead, our baseline is for quarterly cuts until the policy rate reaches our estimate of neutral (+3.25%).”

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