The Monetary Committee of the Bank of Israel decided today (Monday) to keep the interest rate at 4.5%. “The ongoing geopolitical uncertainty hinders economic activity and delays the economy’s return to pre-war activity levels.”
By Nadlan Center
The Monetary Committee of the Bank of Israel announced today (Monday) its decision to leave the interest rate unchanged at 4.5%. The bank noted: “The ongoing geopolitical uncertainty continues to hinder economic activity and delays the economy’s return to pre-war activity levels.”
Additionally, the bank stated: “Inflation over the past twelve months stands at 3.5%, exceeding the upper limit of the target range, and it is expected to rise further in the coming months. Inflation expectations from various sources for the coming year and beyond are within the target range, albeit at its upper end.”
The statement also highlighted that since the last interest rate decision, the shekel has strengthened by 0.9% and 6.4% against the dollar and euro, respectively. In nominal effective terms, the shekel appreciated by 3.7%. “The economy grew by 3.8% annually during the third quarter, but the negative gap relative to the trendline remains significant, largely due to supply constraints.” Regarding the housing market, it was noted: “In the housing market, the pace of housing price increases has moderated. However, constraints on construction activity remain significant.”
Einav Savintzer, Manager of the Southern Region at Eldar Mortgages and the Association of Mortgage Advisors, commented on the decision: “As expected, the Governor of the Bank of Israel announced the maintenance of the interest rate at 4.5%. Several factors influence this decision. The first is the ongoing conflict, despite discussions about a possible ceasefire, alongside inflation (3.5%), which remains above the Bank of Israel’s target range, and the rise in the Consumer Price Index last month. The relatively slow economic growth in recent months is also a factor in maintaining the current interest rate.”
However, she added, “The Governor of the Bank of Israel cannot continue to ignore the global trend of lowering interest rates. The hope is that the end of the conflict, if and when it occurs, will lead to the initiation of a gradual interest rate reduction process by the Bank of Israel later in 2025. Furthermore, the recent strengthening of the shekel reinforces the future basis for an interest rate reduction by the Governor.”
“In October, mortgages totaling 6.91 billion shekels were taken out, a relatively low figure compared to the previous five months. This can be attributed to the holiday season. Compared to September last year, mortgages have increased by about 17%. Homebuyers and mortgage holders face a dual challenge: housing prices continue to rise, while high interest rates and persistent inflation make it difficult for borrowers to meet their monthly payments. At the same time, households are grappling with soaring expenses in other areas.”
