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Israel: Central Bank leaves rates unchanged in May
Latest bank decision: At its meeting on 26 May 2025, the Central Bank decided to leave the interest rate unchanged at 4.50%, where it has been since the start of 2024.
Monetary policy drivers: The Central Bank likely judged it was premature to cut rates given that the labor market is tight, and that inflation is above the Bank’s 1.0–3.0% target range and should stay above target in the coming months. On the flipside, hiking rates was not warranted either, as market inflation expectations for the coming year were still well anchored at the midpoint of the target range.
Monetary easing still the baseline scenario: The Central Bank provided no explicit forward guidance on the future direction of interest rates. Most of our panelists expect rate cuts in 2025, of either 25 or 50 basis points. However, one panelist sees rates on hold. The risk appears to be towards fewer or no rate cuts this year given stubborn price pressures.
