20.08.202513:20:01UTC+00Bank of Israel Keeps Rate at 4.5% Amid Economic Recovery

On August 20, the Bank of Israel maintained its benchmark interest rate at 4.5% for the 13th consecutive meeting, citing indications of a swift recovery following the brief but significant impact of Operation Am Kalvi. In the second quarter, GDP experienced a 3.5% contraction in annualized terms; however, economic activity, excluding the effects of the operation, remained positive, albeit below the trend. Inflation decreased to 3.1% in July, slightly exceeding the central bank’s target range of 1–3%, with projections suggesting a return to target levels soon. Policymakers highlighted risks associated with ongoing geopolitical uncertainties, supply chain constraints, and sluggish global trade. The labor market has largely reverted to conditions seen prior to the operation, the shekel has experienced a slight depreciation, and fiscal deficits persist at a substantial 4.9% of GDP. The Bank of Israel is proceeding with caution, opting to hold interest rates steady while closely observing economic recovery, inflation trends, and geopolitical developments.