Fed Holds Rate Steady: What Israelis Should Prepare For

The US Federal Reserve kept its benchmark interest rate at 3.5–3.75%, as expected. Fed Chair Kevin Warsh warned of a possible hike if inflation accelerates. In Israel, by contrast, the Bank of Israel is considering a rate cut within the next 12 months. The divergence in central bank policies could affect the dollar-shekel exchange rate, import costs, and lending conditions.

The US Federal Reserve held its benchmark interest rate steady at 3.5–3.75% following its July 29, 2026 meeting, in line with market expectations. Fed Chair Kevin Warsh stated that the fight against inflation is not over and that a rate hike could be possible if price growth accelerates. Inflationary pressures are rising due to higher energy costs, supply chain disruptions, and tensions in the Strait of Hormuz and Bab el-Mandeb. In Israel, the situation is different: the Bank of Israel notes that inflation remains within its target range and is open to cutting rates within 12 months. Economists warn that the policy divergence between the two central banks could affect the dollar-shekel exchange rate, the cost of imports and foreign travel, as well as mortgage and consumer lending conditions in Israel.