The end of the war between Israel and Iran has raised the issue of whether the Bank of Israel would reduce interest rates sooner than expected. Before the outbreak of the Israel operation in Iran, the market estimated that the central bank would reduce the interest rate in September, but now the market is pricing by 10 % of the discounts this week, the possibility of 65 % of the reduction in August, and the level of interest rate by 3.6 % by next summer.
Leader Capital Markets also believes that there is an opportunity for the Bank of Israel to reduce interest rates in its next decision tomorrow. In their estimation, there is a 65 % chance to reduce the interest rate this week, due to a decrease in the risk premium in Israel and the sharp estimate of the shekel, which has been strengthened by 6.1 % against the currency basket since the last interest rate decision.
Leaders also indicate that the Consumer Prices Index (CPI) has indicated a general moderation in inflation, including in rental prices, product prices and service prices. Besides, basic inflation was supervised by government intervention (VAT, etc.) to 2.5 % of 2.9 %, near the Bank of Israel price stability. The commander also notes that “pre -war indicators indicate moderation, according to the compound indicator (+0.1 % in May, the recession since December 2024) and according to data of credit cards purchase (the annual average of 1.3 % in February to April).” Finally, the leader also refers to the rest of the global environment as a factor that is expected to support interest rates: “Since the last interest rate decision, most of the central banks in the world (except for the United States) have reduced interest rates or indicate a reduction in the interest rate.”
“The Bank of Israel will wait for inflation to meet the target.”
Other institutional investors such as Meitav and Phoenix do not expect interest rates in Israel until September. “Will we see the low interest rates tomorrow? In our opinion – the answer is no. We do not bet on a reduction in August as well, at least not with a high possibility, although we will be happy with surprise. The hand is easier for us to bet in September, where the Bank of Israel is expected to see the annual inflation inside the goal, and if the stars are aligned, then it may take a bank Federal reserve is the first step at the time.
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Is the BOI interest rate reduction on the cards?
The bank, the bank’s chief financial market, is agreed with a htitrite and believes that the interest rate tomorrow will remain unchanged, “but because of the sharp appreciation of the shekel and low inflation expectations, the Bank of Israel is expected to hint in interest rates in the coming months (August or September).”
It was published by Globes, Israel Business News – En.globles.co.il – on July 6, 2025.
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