Bank of Israel
Israel's central bank, established 1954, with statutory independence under the 2010 Bank of Israel Law. Governor Amir Yaron. Cut its benchmark rate to 3.25% at its September 1, 2026 meeting (the fifth cut since November 2025, lowest since 2022), with inflation running below the midpoint of its 1-3% target range. Supervises the banking system alongside the ISA and CMISA.
The Bank of Israel is Israel's central bank, established in 1954 and granted statutory independence over monetary policy under the Bank of Israel Law of 2010. Governed by Professor Amir Yaron, the bank cut its benchmark interest rate to 3.25% at its September 1, 2026 meeting, the lowest level since 2022 and the fifth cut in the easing cycle that began in November 2025.
What Are the Bank of Israel's Core Mandates?
The Bank operates under four principal mandates: monetary policy and management of the shekel exchange rate, banking supervision, foreign exchange reserves management, and payments-systems oversight alongside a broader financial-stability mandate. It operates alongside the Israel Securities Authority, which supervises capital markets, the Capital Market, Insurance and Savings Authority, which supervises non-bank financial institutions, and the Ministry of Finance.
What Is the Bank's Current Monetary Policy Stance?
The Bank of Israel cut its policy rate by 25 basis points to 3.25% at its September 1, 2026 meeting, contrary to some forecasters' expectations of a hold, bringing the rate to its lowest level since 2022. The cut followed a sequence that began with the first reduction in nearly two years in November 2025 (to 4.25%), then January 2026 (to 4%), May 2026 (to 3.75%) and July 2026 (to 3.5%). Inflation has run below the midpoint of the Bank's 1%-3% target range through most of 2026, helped by a strong shekel, while the Bank's Research Department forecasts GDP growth of 4% in 2026 and 5.5% in 2027. The next rate decision is scheduled for October 21, 2026, with most analysts expecting the Bank to hold and the policy rate to stabilize around 3% over the medium term.
What Risks Has Governor Yaron Flagged?
Governor Yaron has repeatedly cautioned that elevated geopolitical risk, fiscal risk and labor-market pressure complicate the path for rates even as inflation moderates, noting in mid-2026 that wages were rising at an annual rate of about 4.5%. He has also urged the government not to let debt-to-GDP drift too far even if it rises somewhat in 2026, while pressing for a credible commitment to reduce the ratio in 2027, a message he has tied explicitly to the fiscal uncertainty surrounding Israel's planned October 27, 2026 election and the government-formation process that follows.
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See also: Bank Leumi · Bank Hapoalim · Mizrahi Tefahot Bank · Israel Discount Bank · FIBI · ISA · Concentration Group / Oligopoly · Makam · Open Banking · CBDC