Israel's Bank Lowers Interest Rate to 4%

SadaNews - The Bank of Israel announced today, Monday, a reduction in the interest rate by 0.25%, from 4.25% to 4%, after having reduced it by a similar amount at the end of November for the first time in two years.

The Research Department of the Bank of Israel adjusted its macroeconomic forecasts, based on the assumption that the ceasefire in Gaza will hold and that the dismissal of reserve forces will continue.

According to the Research Department's estimates, GDP rose by 2.8% in 2025, and it is expected to increase by 5.2% in 2026 and by 4.3% in 2027.

The unemployment rate is also expected to be 3.3% in 2026 and 3.5% in 2027.

The central bank expects the inflation rate to reach 2.5% in 2025, while the forecasts in September had projected this rate to be 3%. It is expected that the inflation rate will decline to 1.7% in 2026 and to 2% in 2027.

The decision to lower the interest rate was also due to the depreciation of foreign currencies against the shekel.

The budget deficit was 4.8% in 2025 and is expected to decline to 3.9% in 2026, with public debt reaching 68.5% of GDP in the years 2025, 2026, and 2027.