Bank of Israel holds rates at 3.25% amid Iran concerns
The article focused on the Bank of Israel's decision to keep the interest rate at 3.25%, following three consecutive cuts, amidst a backdrop of political and security uncertainty ahead of the Knesset elections scheduled for next week, and tensions with Iran. Despite inflation easing to 1.6%, the bank decided not to reduce the rate further due to political and security factors. It also added that only one interest rate cut is expected in the coming year, bringing it down to 3%, with inflation projected to fall to 1.5% by the end of 2026. Additionally, the bank pointed out that the budget deficit has risen to 4.6%, driven by ongoing military expenditure, and predicted economic growth of 3.4% in 2026 and 7.5% in 2027, with public debt increasing to 68% of GDP in 2026. In another monetary matter, the bank governor denied plans to eliminate the 200 shekel note, clarifying that reliance on artificial intelligence affects the labor market, and that unemployment is expected to decrease in the coming year, despite geopolitical risks that make the bank cautious in its monetary policy management.
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