Bank of Israel Cuts Rate to 3.5% as Inflation Eases

The Bank of Israel's Monetary Committee lowered the benchmark rate by 0.25 percentage points to 3.5%, giving households and businesses a measured easing step while annual inflation sits at 1.9%, near the midpoint of the target range. The Bank tied the decision to lower energy prices after the U.S.-Iran memorandum, continued recovery from Operation Roaring Lion, and still-high uncertainty from labor constraints and fiscal pressure. Its research staff now expects GDP growth of 4.0% in 2026 and 5.5% in 2027, with inflation around 1.8%. The move rewards Israeli resilience, but it also keeps the burden on disciplined budgeting and careful defense planning.