(Bloomberg) -- Israel kept interest rates on hold for a ninth straight meeting, with the central bank waiting for war-induced inflation to slow before starting an easing cycle.
Most Read from Bloomberg
-
Trump Targets $128 Billion California High-Speed Rail Project
-
Trump Asserts Power Over NYC, Proclaims ‘Long Live the King’
-
NYC’s Congestion Pricing Pulls In $48.6 Million in First Month
The Bank of Israel held its base rate at 4.5%, according to a statement on Monday, a decision in line with all analysts in a Bloomberg survey.
“In view of the continuing war, the Monetary Committee’s policy is focused on stabilizing markets and reducing uncertainty, alongside price stability and supporting economic activity,” the central bank said in a statement following the decision.
Guidance was unchanged from previous months. “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,” the central bank said.
Israel’s economy is starting to recover from the strain of conflicts with Iranian-backed militant groups, after ceasefires in Gaza and in Lebanon. Yet annual inflation is running at 3.8%, above the country’s official target of 1% to 3%. That’s mainly due to a hike in value-added tax aimed at funding Israel’s higher defense needs and in electricity and water costs.
Citigroup Inc. said ahead of Monday’s rates decision that Governor Amir Yaron may start cutting rates by May, provided inflation decelerates and risk premiums related to Israel’s conflict remain under control.
The central bank noted that, according to forecasters’ projections, inflation should fall below 3% in the second half of the year, and that 12-month expectations are within the target range.
“In contrast to the situation in the US, inflation expectations in Israel are low, and the fiscal situation also looks better,” Bank Hapoalim, one of Israel’s two largest lenders, said in a note to clients last week.
Bringing inflation down is seen as one of the last major obstacles to monetary easing, with Israeli assets, including the shekel and the country’s credit-default swaps, having largely stabilized on the back of the truces from late last year.
The Israeli shekel is up 1.8% against the dollar in 2025, roughly in line with other so-called expanded-major currencies tracked by Bloomberg.
But there’s no guarantee the ceasefires will hold, particularly in Gaza. The initial stage of that pause ends this coming weekend, and there’s been little indication yet that terms on an extension will be agreed.