Interest rate in Israel: should we expect new cuts in September

Bank of Israel Governor Amir Yaron stated that inflation will rise from 1.5% to 2%, casting doubt on further interest rate cuts in September. The rate was previously reduced to 3.5%, with plans to lower it to 3% by the end of the year. The regulator will act based on data, considering the labor market, geopolitical and fiscal risks.

Bank of Israel Governor Professor Amir Yaron has issued a forecast according to which inflation in Israel will rise from the current 1.5% to 2% in the coming months. This forces the financial regulator to act with extreme caution. Previously, the Central Bank had already cut the interest rate twice in a row, bringing it to 3.5% with plans to lower the figure to 3% by the end of the year. However, according to Yaron, further monetary policy easing in September is now not guaranteed at all. The regulator will make decisions solely based on incoming data in real time. The level of uncertainty in the economy has increased significantly, and now the bank's leadership must consider a whole range of factors: from the situation in the labor market to geopolitical and fiscal risks. The Governor of the Bank of Israel paid special attention to the economic challenges the government will face after the October elections. The new cabinet will have to solve a most difficult task: to achieve a reduction in the national debt without cutting vital spending on defense and investments in economic growth. The article also reports that the Israeli economy in the second quarter of 2026 showed a sharp recovery: GDP grew by 15.4% on an annualized basis, significantly higher than analysts' expectations (about 10%).