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Bank of Israel Makes Surprise Rate Cut as Inflation Moderates and Shekel Gains
The Bank of Israel building is seen in Jerusalem, June 16, 2020. Photo: REUTERS/Ronen Zvulun
The Bank of Israel unexpectedly cut its interest rate by 25 basis points on Monday, a second successive cut after lowering it in November for the first time in nearly two years, citing an improving inflation environment after the Gaza ceasefire.
The benchmark short-term rate was reduced to 4.00% from 4.25%.
Bank of Israel Governor Amir Yaron said that despite the two cuts in a row, policymakers would remain cautious and mindful of economic and inflation developments and that the monetary committee’s base scenario was for the key rate to slip to 3.5% this year – two more 25 bps reductions.
He told a news conference that three factors contributed to the decision to lower rates again – easing inflation, a shekel that has reached a four-year peak versus the dollar and declining supply constraints.
SIGNS OF FEWER LABOR MARKET CONSTRAINTS
“Since the ceasefire [with terrorist group Hamas], there has been a change in the inflation environment,” Yaron said.
Supply constraints had stoked inflation during the two-year war in Gaza that ended with a US-brokered ceasefire in October 2025 but the annual inflation rate eased to 2.4% in November, within the government’s 1%-3% target range.
“While the labor market is tight, there are signs of moderation in supply constraints in the labor market,” Yaron said.
He also pointed to declining inflation expectations in the bond market and the stronger shekel, in which the currency’s appreciation supports lower inflation levels.
“These three factors together contributed to the decision to [cut] now rather than a bit later,” Yaron said, also noting that Israel‘s risk premium has moved back to near its pre-war level.
The bank‘s forecasters projected that there would be an increase in inflation when December’s data is released by the statistics office on Jan. 15, and it would then decline to around the midpoint of the policy target range.
NEXT DECISION DUE FEB. 23
Despite easing price pressures and a four-year high for the shekel against the dollar, nine of the 10 economists polled by Reuters had forecast the central bank would hold rates this month. One economist expected a quarter-point reduction.
The next decision is slated for Feb. 23, after both the December and January inflation figures are published.
The shekel was up 0.8% against the dollar at a 3.157 rate, its strongest since December 2021. Tel Aviv share indexes rose as much as 1.6%.
In updated forecasts, the central bank projected economic growth of 5.2% for this year after a 2.8% pace in 2025 that was held back by the war, and an inflation rate of 1.7% in the coming year.
Yaron also urged lawmakers to approve the 2026 budget. While it has received cabinet approval, it was not yet clear whether it will pass parliament due to political infighting. Failure to pass the budget by the end of March would trigger a new election.
Still, Yaron said the planned deficit target of 3.9% of GDP was too high.
“Complying with this deficit target depends on … there not being geopolitical developments that will require an additional increase in defense expenditures and that the assumptions in the revenue path will in fact materialize,” he said.
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Lindsey Graham urges Israel not to strike Iranian oil depots even as he says he helped make war happen
(JTA) — Sen. Lindsey Graham of South Carolina has called on Israel to rein in its attacks on Iranian oil infrastructure, marking a rare note of caution from a Republican lawmaker who has said he helped push the United States to join Israel in waging war against Iran.
In a post on X on Sunday, Graham praised Israel for its role in the war before adding that “there will be a day soon that the Iranian people will be in charge of their own fate, not the murderous ayatollah’s regime.”
“In that regard, please be cautious about what targets you select,” continued Graham. “Our goal is to liberate the Iranian people in a fashion that does not cripple their chance to start a new and better life when this regime collapses. The oil economy of Iran will be essential to that endeavor.”
Graham’s post linked to an Axios article that reported that the United States was alarmed by Israeli strikes over the weekend that targeted 30 Iranian fuel depots. On Monday, U.S. gas prices rose to their highest levels since 2024.
The warning from Graham, an ally of President Donald Trump and staunch supporter of Israel, comes days after the Republican hawk told the Wall Street Journal that he had played a key role in urging Trump to strike Iran.
Prior to the joint U.S.-Israeli strikes on Iran, Graham made several trips to Israel where he met with members of the Mossad, Israel’s intelligence agency, as well as Israeli Prime Minister Benjamin Netanyahu whom he said he coached on how to lobby Trump to strike Iran.
“They’ll tell me things our own government won’t tell me,” Graham told the newspaper.
On Monday, Graham also directed his criticism at Saudi Arabia’s decision to stay on the sidelines of the campaign against Iran.
“It is my understanding the Kingdom refuses to use their capable military as a part of an effort to end the barbaric and terrorist Iranian regime who has terrorized the region and killed 7 Americans,” wrote Graham in a post on X Monday. “Question – why should America do a defense agreement with a country like the Kingdom of Saudi Arabia that is unwilling to join a fight of mutual interest?”
The post Lindsey Graham urges Israel not to strike Iranian oil depots even as he says he helped make war happen appeared first on The Forward.
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Belgian officials investigating synagogue explosion as possible act of terrorism
(JTA) — Belgian officials are investigating an explosion in front of a synagogue in Liège early Monday as a possible act of terrorism.
The explosion, which took place at 4 a.m., damaged the door of the historic neo-Romanesque synagogue and blew out the windows of multiple buildings across the street. No injuries were reported.
A range of Belgian politicians, including the prime minister and the mayor of Liège, characterized the explosion as act of antisemitism.
“Antisemitism is an attack on our values and our society, and we must fight it unequivocally,” Prime Minister Bart de Wever said in a statement. “We stand in solidarity with the Jewish community in Liege and across the country.”
The explosion comes amid a surge of concern about possible attacks by agents associated with the Iranian regime, against which the United States and Israel launched a war last week. Iran has a long record of supporting attacks on Jewish targets abroad, including two bombings in the 1990s in Argentina that killed more than 100 people at the Israeli embassy and a Jewish community center. Now, with Iran being pummeled at home, watchdogs are warning that it might lash out through its Iranian Islamic Revolutionary Guard Corps Quds Force, responsible for attacks abroad.
Azerbaijan said Friday that it had foiled multiple terror attacks planned by Iranian agents on Jewish sites. In London, four men were arrested last week for allegedly spying on the Jewish community for Iran, with the intent of planning attacks against the community. And a string of shootings at synagogues in Toronto has ignited concern in Canada, too.
Iranian agents have taken aim at non-Jewish targets, too. On Friday, a Pakistani man who prosecutors said had been directed by Iran’s IRGC was convicted of plotting to assassinate President Donald Trump.
The attack in Liège, in the primarily French-speaking Wallonia province, comes amid a range of recent developments that have unsettled Belgian Jews, who number approximately 30,000. They include antisemitic carnival caricatures in the city of Aalst; a ban on ritual slaughter preventing the local production of kosher meat; and an ongoing row between U.S. and Belgian officials over Jewish circumcision practices. The attack also follows a 2014 shooting in which a gunman associated with the Islamic State, a rival to Iran’s Islamic Republic, shot four people to death at the Jewish Museum in Brussels.
A spokesperson for the Liège police described the effects to the area as “only material damage” to the 1899 building. Rabbi Joshua Nejman told local media that he was hoping that security footage would reveal the perpetrator.
“I’m going to try to calm my heart, because it is beating faster and faster this morning,” said Nejman, who said he had been at the synagogue for 25 years.
“Liege is home to a very small but vibrant Jewish community where I personally grew up,” Eitan Bergman, vice president of the Coordinating Committee of Jewish Organisations in Belgium, told Reuters. “Today, the feelings among our community members are a mixture of sadness, worry and profound shock.”
Liege’s mayor, Willy Demeyer, praised the synagogue community to RBTF, Belgium’s French-language national broadcaster. He added, “We cannot allow foreign conflicts to be imported into our city.”
The post Belgian officials investigating synagogue explosion as possible act of terrorism appeared first on The Forward.
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The Top 100 People Positively Influencing Jewish Life, 2025
In honor of The Algemeiner‘s 12th annual gala, we are proud to present our “J100” list — 100 individuals who have positively influenced Jewish life over the past year.