The Bank of Israel left its short-term rate unchanged at 3.25%, a week before the country's election. Governor Amir Yaron said economic factors alone drove the decision and stayed non-committal on further easing.
The Bank of Israel left short-term interest rates unchanged at 3.25% on Wednesday, opting to hold ahead of the country's election next week and amid sustained geopolitical tensions. All 15 economists polled by Reuters had expected no move.
The bank had cut rates in November and January before pausing due to the conflict with Iran and fears of a spike in supply-driven inflation. It then resumed cuts in May, July and September.
Yaron stays non-committal on more cuts
The bank's own economists maintained an estimate of one more cut to 3.0% in the coming year. Yaron, however, was non-committal over future monetary easing at a news conference, citing factors including a tight labour market. He rejected the notion of holding fire due to Tuesday's vote and said the decision was based solely on economic factors.
According to Reuters, Yaron said: "The decision to keep the interest rate unchanged is the right one." He noted the trend of rising rates in the US and Europe, but said it is appropriate to continue monitoring the cumulative impact of measures already taken.
Inflation and growth forecasts
The annual inflation rate edged up to 1.6% in September, within the bank's 1% to 3% target range, from 1.5% in August. It is forecast to reach 2% in a year's time.
The bank's research department expects the economy to grow by 5.6% in 2026 and by 7.5% in 2027. Much of the revision reflects the large expected contribution of production abroad by Israeli firms, which may create a distorted picture of the pace of real domestic economic activity, the bank said. Excluding production abroad, growth was forecast at 3.4% in 2026 and 5.1% in 2027.
The shekel was flat at 3.09 per dollar after weakening 3% since the previous rates decision on September 1.
Source: Economy News
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