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Bank of Israel Cuts Rate to 3.5% in Second Cut

7/7/2026

33 5 Full Breakdown

Summary

Bank of Israel Cuts

The Bank of Israel Monetary Committee lowered the national interest rate to 3.50% on July 6, 2026, a second consecutive 0.25% cut.
The committee cited the strong shekel, inflation near the target midpoint, lower risk premium and a U.S.–Iran memorandum that eased energy prices.
It cut 2026 inflation forecast to 1.8%, expects rate to fall to 3% within a year, and notes Finance Minister Bezalel Smotrich urged a sharper cut.

Summary

Yaron Cuts Rates

Governor Amir Yaron announced a July 6 rate cut, the third reduction this year.
He warned that the shekel’s sharp appreciation threatens Israel’s export and high-tech sectors.
He cautioned that higher defense spending could push the fiscal deficit beyond target and lift inflation.
He said the economy’s 2.9% 2025 growth, slowed by the war, and falling inflation expectations support a faster, more accommodative stance.

Summary

Yaron Rate Cut

Governor Amir Yaron said the bank cut rates because of ongoing political uncertainty and the pending election date.
The cut will lower monthly mortgage payments for borrowers.
Businesses that borrowed during the prolonged war will benefit from cheaper financing.
The updated forecast projects the 2026 budget deficit at 4.9% of GDP, falling to 4.2% in 2027, with the debt-to-GDP ratio stabilizing around 69% for both years.

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Bank of Israel Cuts

The Bank of Israel Monetary Committee lowered the national interest rate to 3.50% on July 6, 2026, a second consecutive 0.25% cut.
The committee cited the strong shekel, inflation near the target midpoint, lower risk premium and a U.S.–Iran memorandum that eased energy prices.
It cut 2026 inflation forecast to 1.8%, expects rate to fall to 3% within a year, and notes Finance Minister Bezalel Smotrich urged a sharper cut.

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