Bank of Israel/ Wikipedia
The Bank of Israel’s Monetary Committee announced on April 7, 2025, that it will maintain the interest rate at 4.5%, leaving borrowing costs unchanged in its latest policy decision.
The move reflects the central bank of Israel’s cautious approach amid ongoing economic uncertainty, as it continues to monitor inflation trends, global financial conditions, and domestic growth indicators.
By keeping the interest rate steady, the Bank of Israel aims to balance support for economic stability with efforts to control inflation and maintain financial market confidence.
Will you offer us a hand? Every gift, regardless of size, fuels our future.
Your critical contribution enables us to maintain our independence from shareholders or wealthy owners, allowing us to keep up reporting without bias. It means we can continue to make Jewish Business News available to everyone.
You can support us for as little as $1 via PayPal at [email protected].
Thank you.
The Bank of Israel listed a number of factors in its decision.
The main one is that the U.S. government’s newly announced tariff program has triggered significant turbulence in global markets, leading to sharp market declines, downgrades in global growth and trade forecasts, and a rise in inflation expectations within the United States.
Against the backdrop of ongoing geopolitical developments, economic activity in Israel continues to show moderate recovery, supported by a resilient labor market and a rebound in the construction sector, said the Bank.
The Bank of Israel also explained that in the 12 months leading up to April 2025, Israel’s inflation rate fell to 3.4%, still above the Bank of Israel’s target range, but expected to gradually moderate in the coming months.
Since the last interest rate decision, the shekel has weakened, falling 4.3% against the U.S. dollar, 9.5% against the euro, and 5.8% in terms of the nominal effective exchange rate.
Increased geopolitical and economic uncertainty has also led to a rise in Israel’s risk premium, as reflected in the 5-year CDS spreads and yields on U.S. dollar-denominated government bonds, now higher than pre-conflict levels.
According to the Bank of Israel Research Department’s latest forecast, GDP is projected to grow by 3.5% in 2025 and 4.0% in 2026, both revised downward from the January projections. The forecast attributes the slowdown in part to the U.S. tariff policy, which is expected to dampen global trade volumes and Israeli exports, potentially impacting the country’s economic momentum in the near term.
In view of the continuing war, the bank of Israel’s Monetary Committee’s policy is focusing on stabilizing the markets and reducing uncertainty, alongside price stability and supporting economic activity. The interest rate path will be determined in accordance with the convergence of inflation to its target, continued stability in the financial markets, economic activity, and fiscal policy.
