Overview
- Governor Amir Yaron cited easing inflation, a stronger shekel at a four-year high and fewer labor-supply constraints as the reasons for the 25-basis-point reduction.
- November consumer inflation ran at 2.4% within the 1%–3% target, with a temporary December uptick expected before settling near the midpoint.
- The bank’s base scenario anticipates two additional quarter-point cuts this year to about 3.5%, with the next policy decision set for February 23 after December and January CPI data.
- Updated projections see GDP growth of 2.8% in 2025 and 5.2% in 2026 and inflation at 1.7% in 2026, contingent on the Gaza ceasefire holding and declining reserve service.
- Markets firmed around the move as the shekel touched its strongest level since December 2021, CDS spreads neared prewar levels and Tel Aviv shares rose up to 1.6%, while Yaron urged passage of the 2026 budget and called the planned 3.9% deficit too high.