BlockBeats report: On May 25, as the United States and Iran appear to be moving closer to an agreement to end hostilities, the Bank of Israel is expected to cut interest rates. According to a survey of 14 economists, eight anticipate that the Bank of Israel will lower its benchmark rate by 25 basis points to 3.75% on Monday.
Rafael Gozlan, Chief Economist at IBI Investment Company, said: “From the central bank’s perspective, inflation remaining stable near the midpoint of the target range (1.9%), combined with the shekel’s significant appreciation, supports a modest interest rate cut. The next decision will depend on geopolitical developments. If there is no major escalation in the situation, we expect a rate cut; if conditions worsen, rates may remain unchanged.”
The Israeli shekel closed last Friday at 2.9 shekels per U.S. dollar, maintaining its strongest level in over three decades and further reinforcing market expectations of subdued future inflation. According to a survey released by the Bank of Israel on May 19, the average inflation expectation for the next 12 months has declined from 2.3% to 1.8%. Since the Monetary Committee’s last interest rate decision at the end of March, the shekel has appreciated by 8% and has gained nearly 24% over the past year. Other factors supporting a potential rate cut include the slow recovery of the Israeli economy from the conflict with Iran, with growth expected to show no significant acceleration even if a final agreement is reached.